Management practices in the private sector: A summary of IGC research

This sub-thematic summary highlights the IGC’s research on management practices in the private sector over the past 10 years.

The substantial productivity differences between workers and firms in developed and developing countries have long interested development economists. Unexplained productivity gaps are a major focus for economists seeking to explain the severe income disparities between rich and poor countries. Similarly, stark productivity differences are reflected between firms within countries. Recent evidence has recognised the importance of effective management for firm productivity.

Many developing country firms have poor management practices. This can, in part, explain the difference in productivity between developed and developing countries (Bloom et al. 2013). Improving management practices can increase firm productivity and profitability and support innovation in firms, thereby increasing incomes and jobs available, and contributing to sustainable economic growth in developing countries.

In recent years, research has aimed at filling a substantial gap in quantitative data evaluating management. The IGC has funded a number of projects to contribute to this work, importantly extending the assessment of management to developing countries, and identifying the link between management and productivity. In particular, IGC projects have focussed on management in the garment sectors, the use of incentives by firms, and the influence of the financial literacy of managers.