Is Poor Management Holding Back African Development?

These researchers use their existing in-depth survey methodology to collect extensive management data on three African countries and Brazil and investigate differences in management practices and productivity across firms and countries.

While many business-people and policy-makers believe a major reason for lower productivity – and ultimately development – in African countries is poor business and management skills, little rigorous evidence is available to back this claim. Academic economists have only recently started paying attention to management practices and their influence on firm productivity, and good quality international data on managerial practices in low income countries (Sub-Saharan Africa in particular) is relatively scarce. With this project, the team aims to fill this gap in the literature by extending their ongoing management survey research, for the first time, to three African countries (Kenya, Tanzania and Uganda), collecting data on 750 African firms.

Since 2001, Nick Bloom and John Van Reenen have been collecting management practices data from over 10,000 manufacturing firms in middle and high-income countries. They found that large variations in management practices across firms and countries were strongly associated with differences in firm and national performance. The data showed that firms in middle income countries have much worse management practices than firms in high income countries, suggesting that poor management could be a key factor behind their low income productivity. Further, their work revealed that competition, family firms, skills, and labor market regulations play a major role in explaining variations in management practices across firms and countries.[1]

The data collected within this project will allow the team to address three further research questions:

  • How do management and organizational practices stack up in Africa versus key competitors from Brazil, China and India? Alongside their data collection on African firms, the researchers plan to run a survey of 750 firms in Brazil, to complement their existing data on firms in China and India as a comparison group. The team believes that the main competitors for these African countries are middle-income countries like Brazil, China and India, and that research and policy recommendations will be much stronger if they can compare their results on African countries with those countries.
  • What determines the spread of these practices across firms – in particular, what role does infrastructure play? Infrastructure provision is a key and policy relevant theme in the context of low-income/middle-income countries. The team will conduct micro level data analysis to investigate whether the effect of management varies across different infrastructure levels.
  • Can the misallocation of Total Factor Productivity (TFP) in African countries be explained through differences in management practices across firms? To the extent that management practices are seen as a component of TFP, the survey instrument proposed in this study will yield a uniform measure of TFP across countries and thereby allow an unprecedented investigation of the misallocation of resources across firms and countries.

The researchers will use their existing in-depth survey methodology to investigate and explain differences in management practices across firms and countries. After conducting phone interviews on a sample of medium-sized firms, they will evaluate and score management practices using a survey tool which codifies the concept of “good” and “bad” management by scoring 18 key practices used by manufacturing firms across different sectors. In addition, they will collect data on the organizational characteristics of the firms interviewed, as well as detailed characteristics of the plant workers and the manager interviewed. In particular, they will inquire the gender of the workers and managers, allowing them to compare the gender-balance in their sample of African firms with that of other countries, and investigate the correlation of gender-balance with management and firm productivity. Finally, the team will also collect information on the manager’s perception of and attitude towards the environment, in order to detect any relationship between managerial characteristics and environmental practices within African firms.