Organizational Learning: Experimental Evidence from Bangladeshi Garment Factories

Monday, 19 December, 2016
Organizational learning, or the sharing of knowledge among co-workers in fi rms, has long been assumed to be a key driver of productivity growth. However, because knowledge exchange is inherently difficult to observe, identifying the e ffect of knowledge sharing on productivity has remained problematic. The literature has often measured knowledge exchange in fi rms through increases in productivity of workers if other workers in the same firm have already produced the same product. However, this approach risks confounding the e ffect of knowledge exchange with other peer e ffects, such as competition. This paper by Andreas Menzel (2016) provides evidence from a communication intervention in three Bangladeshi garment factories in which randomly selected workers were instructed by their superiors to share production knowledge when one worker started producing a garment that the other had already produced. The intervention increased the productivity of the later workers producing the garment by 0.2 standard deviations during the first one to two days they produce the garment, before their productivity reached its long-run level again. There is some evidence that the e ffect was stronger if the workers sharing knowledge were socially connected. A back-of-the envelope calculation indicates that the return on this low-cost intervention is in excess of 600 percent. Furthermore, compliance by the factories in implementing the intervention was higher if the later workers that should receive knowledge were younger. This indicates that workers' status concerns could interfere with the implementation of such a management routine, and could explain why the routine had not been implemented earlier by the factories.