Econ for Progress


A Blog about Public and Development Economics

Can Family-Run Indian Businesses Improve Their Efficiency?

Ajay Shah’s article for the Financial Express points to recent research that suggests that smaller, family-run businesses stand to gain much from modern management science.

Some argue that the traditional family business knows what it is doing, and denigrate the fancy-pants MBAs and consultants. Others argue that the state of the art in scientific management has a lot to offer. In a remarkable recent paper titled Management matters: Evidence from India, a team of five economists (Bloom, Eifert, Mahajan, McKenzie, Roberts) has brought new evidence on the table.

The authors setup a free consulting program for 17 randomly chosen textile weaving firms in Tarapur and Umbergaon… Each of these firms was given consulting inputs from Accenture, a top-end global consulting firm.

The results were impressive. There was a rise in profit of the treated companies by Rs.1 crore a year. Even if the market price – of Rs.2 crore – was paid for the consulting, it pays for itself within two years.


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