Management practices, firm ownership, and productivity in Latin America

We analyze management and performance data for over 8,000 manufacturing firms across the Americas, Asia and Europe. We find that Latin American firms have poor management practices by international standards, with limited monitoring, short-term and narrow targets, and ineffective human-resource practices. A major factor behind this poor management quality is the high incidence of firms owned and controlled by the founder or the founding family. In Latin America, these firms lag both in average management quality when compared to firms of the same ownership structure in other regions and in catching up to their peers within their regions. Limited product market competition, the presence of few foreign multinationals, already explored by Bloom et al. (2012b), also appear to account for poor management practices. Across firms, we find that poor management practices are linked to a less educated workforce and low export orientation as well as heavy labour-market regulations and limited access to credit. Finally, we show that better management quality is tightly linked to higher firm and national productivity, confirming that the management practices measured are economically meaningful.