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In 2006, Norway imposed a quota requiring that the boards of directors of public limited companies be composed of at least 40 percent female members. Governments across Europe have since adopted or proposed similar rules. This paper examines the impact of the Norwegian quota on the management style of affected firms by comparing them to other Scandinavian companies, public and private, that were unaffected by the rule. Based on differences-in-differences and triple-difference models, we find that firms affected by the quotas undertook fewer workforce reductions than comparison firms, increasing relative labor costs and employment levels and reducing short-term profits. There is no evidence of preexisting trends, and the effects are strongest among firms that had no female board members before the quota was introduced. The boards appear to be affecting corporate strategy in part by selecting likeminded executives. The results are consistent with changes in board composition affecting corporate governance and strategy, and with prior research suggesting that female managers may be more stakeholder or long-term oriented than their male counterparts.

We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of management practices is associated with a 17.4 % reduction in energy intensity. This negative relationship is robust to a variety of controls for industry, location, technology and other factor inputs. Better managed firms are also significantly more productive. One interpretation of these results is that well managed firms are adopting modern lean manufacturing practices, which allows them to increase productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions.

We examine micro-level channels of how financial development can affect macroeconomic outcomes like the level of income and export intensity. We investigate theoretically and empirically how financial constraints affect a firm’s innovation and export activities, using unique firm survey data which provides direct measures for innovations and firm-specific financial constraints. We find that financial constraints restrain the ability of domestically owned firms to innovate and export and hence to catch up to the technological frontiers. This negative effect is amplified as financial constraints force export and innovation activities to become substitutes although they are generally natural complements.

We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high-trust regions are significantly more likely to decentralize. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational’s country of origin and subsidiary’s country of location increases decentralization, even after instrumenting trust using religious similarities between the countries. Finally, we show evidence suggesting that trust raises aggregate productivity by facilitating reallocation between firms and allowing more efficient firms to grow, as CEOs can decentralize more decisions. JEL Codes: L2, M2, O32, O33. I.

Firms irms operate in complex environments: a list of the categories in which they need to make interrelated choices would include employee pay, pricing, product attributes, production technologies, and management. In turn, these decisions involve responding to characteristics that are often hard to measure or uncertain, such as those related to market characteristics, the productivity of individual inputs, and entrepreneurial ability. Due to the complexity of the environment, research that seeks to understand the behavior of firms based on observational data faces many challenges at uncovering causal relationships. In this paper, we illustrate how field experiments, guided by economic theory, can address these challenges and provide new answers to long-standing questions about firms: Do firm choices maximize profits subject to constraints? If so, which constraints bind and inform decision making in firms? If not, why are firms operating inside the frontier? In this paper, we review field experiments that provide preliminary answers to these questions and map directions for further research. We organize our discus-sion into two classes of work. The first is field experiments conducted within firms, in which the units of observation are workers or divisions of a firm. The theory behind many of these experiments views the firm as an organization, emphasizing agency problems. We discuss field experiments that shed light on solutions to the agency problem, from incentive pay to social pressure and nonmonetary rewards.

In this chapter we examine the relationship between Human Resource Management (HRM) and productivity. HRM includes incentive pay (individual and group) as well as many nonpay aspects of the employment relationship such as matching (hiring and firing) and work organization (e.g. teams, autonomy). We place HRM more generally within the literature on management practices and productivity. We start with some facts on levels and trends of both HRM and productivity and the main economic theories of HRM. We look at some of the determinants of HRM – risk, competition, ownership and regulation. The largest section analyses the impact of HRM on productivity emphasizing issues of methodology, data and results (from micro-econometric studies). We conclude briefly with suggestions of avenues for future frontier work.

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this we ran a management field experiment on large Indian textile firms. We provided free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. We find that adopting these management practices had three main effects. First, it raised average productivity by 11 % through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Our results suggest that informational barriers were a primary factor in explaining this lack of adoption. Modern management is a technology that diffuses slowly between firms, with many Indian firms initially unaware of its existence or impact. Since competition was

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The productivity of firms in developing countries appears to be extremely low. Table 1 reports GDP per capita and average firm-level sales per employee in manufacturing—commonly known as labor revenue productivity—across a sample of countries from a new international firm database (ORBIS). While there are some data comparability issues, the broad message seems clear: developing-country firms have lower levels of labor productivity. Prior work, such as that summarized in James Tybout (2000) and World Bank (2004), has highlighted a set of issues around infrastructure, informality, regulations, trade policies, and human capital that reduce the productivity of firms in developing countries. In this short article we want to focus instead on three other areas which recent research has emphasized: management practices, financial constraints, and the delegation of decision making. To summarize: we find evidence that firms in developing countries are often badly managed, which substantially reduces their productivity. This appears particularly important in larger firms (100+ employees), which are operationally complex so that effective coordination and motivation require formalized management practices. We also find that financial constraints are a binding factor for growth, notably in smaller firms. In larger firms, which often appear to have already overcome financing constraints, another growth constraint arises in the inability of firms to successfully decentralize decision making. In developing countries owners tend to make almost all major management