Question

Bloom, Eifert, Mahajan, McKenzie, and Roberts, economists from a range of places including Stanford University and the World Bank, recently published a paper describing a field experiment they ran on a group of large Indian textile firms. Using a sampe of several dozen firms, the researchers randomly sorted those firms into one of two groups. IN the treatment group firm managers received five months of extensive management training from a large international consulting group. They were taught a range of operational practices that earlier research suggested might be effective. A second, control group received a shorter period of diagnostic consulting, with no training. The results? Within the first year after treatment, productivity in the treated plants increased by 17%. One of the authors of this textbook teaches MBA students and wasa pleased to read these results..

Many of the firms treated had multiple plants. After the researchers left, what do you think they did about training in thier other plants?

Answer 1

1. The mentioned economists mentioned in the question ran a free consulting program on practices of management to some randomly selected plants and later comparing their performance with set of plants which are controlled as an experiment.

2. They ran this survey or say experiment on large textile firms in India in order to observe whether management practices across firms bring differences in rate of productivity specifically in developing countries.

3. They observed that these practices of management brought changes in the rate of production by more than 15%.

4. This is done by improvement in quality, efficiency and also by reducing inventory and which later led to further improvement in number of production plants.

5. Concluding, Competition is not the only factor which forces firms to exit of the market but also the lack of managing time, labour, capital, etc. also play a key role in the exit of the firms. That's why management plays a key role in developing countries as per the experiment.