The vast inequality in performance between establishments within countries as well as differences across countries have been thoroughly documented in the past decades. An emerging literature finds that large variations in management practices are strongly associated with differences in performance across firms and countries and suggests that this relationship may be causal.
The key purpose of this project is to measure management practices, undertake a rigorous empirical analysis of the management-performance relationship, and investigate the determinants of management practices in manufacturing establishments within and across provinces in Pakistan. In partnership with the State Bank of Pakistan (SBP) and the Pakistan Bureau of Statistics (PBS), we extended the US Census Management and Organizational Practices Survey (MOPS) methodology for the first time to Punjab, Pakistan. In 2014-2015, we conducted face-to-face interviews of plant managers in nearly 2,000 establishments in Punjab and mapped this data to performance indicators from the Census of Manufacturing.
This exercise has revealed the following: (i) Punjab plants have lower average management scores and a higher level of dispersion than the US, suggesting that weakly managed firms exit more slowly, (ii) establishments with higher management scores are significantly more productive, profitable and grow faster, and (iii) a one standard deviation increase in the management score is associated with 21% higher labor productivity – almost identical to the US. This has been a first step towards understanding the state of management practices in Punjab, Pakistan, raising the question of how well managed establishments in other provinces are, and whether this explains any uneven growth within Pakistan.
The State Bank of Pakistan (SBP) is making a fresh attempt to conduct a Census of Manufacturing Industries (CMI) in Sindh, Baluchistan and KPK provinces of Pakistan which have been previously inaccessible to applied-micro researchers, due to the lack of administrative data and difficulties in collecting data on the field (challenging law and order situation and difficult access). This project proposes to collect further management data by appending MOPS to the CMI questionnaire and extending it to 2,500 firms in Sindh, Baluchistan and KPK provinces of Pakistan. This exercise will be conducted by the Statistical Bureau. With this new data we aim to address the following questions:
- What is the relationship between management practices and productivity, employment and growth in other remaining three provinces of Pakistan which have been so far been inaccessible to many researchers?
- What are the differences in management practices between provinces?
- What is the impact of management practices on productivity, employment and growth in Pakistan?
- What determines the spread of these management practices across firms– in particular, what policies might help to boost management, and, ultimately, raise growth?