What have we learned so far? • Week 1: Strategy as IO as microeconomics − Value, scarcity, rents, thinking in relative terms • Week 2: Industry analysis, i.e. “Porter’s Five Forces” − Why are some industries more profitable than others? • Week 3: Competitive advantage − Why are some firms more profitable than their competitors? • Week 4: − When is competitive advantage sustainable? Why?
What are we going to learn next?
Management practice and productivity
Introduction • In week 3 we saw that performance differences within industries are larger than performance differences across industries − Typical US manufacturing industry: 95 th percentile plants get twice as much output per unit of input as 5 th percentile plants − That’s ridiculous!!! What could be causing this? • Top hypothesis: differences in management practices − Over a million “management books” on Amazon − Do “good” managers take different actions with the same labor, capital and materials? − How could we find out? § Run a randomized experiment!
Bloom et al : RCT of management practices • Select 20 cotton fabric plants near Mumbai − Each is part of large multi-plant firms − Average 300 employees − Average $7MM sales • “Treated” get 5 months of management consulting intervention • “Control plants” get 1 month • Consulting offered on 38 specific practices tied to factory operations, quality, and inventory control • Collect weekly data on all plants from 2008 to 2010
Conditions: many parts of plants were dirty and unsafe Garbage outside the plant Garbage inside a plant Chemicals without any covering Flammable garbage in a plant
Conditions: the plant floors were often disorganized and aisles blocked Instrument not removed after use, blocking hallway. Tools left on the floor after use Dirty and poorly maintained machines Old warp beam, chairs and a desk obstructing the plant floor
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- Spring '17
- Management, Coal, treatment plants, Control plants, Vertical Integration