Intra-Firm Knowledge Spillovers vs. Inter-Firm Spillover Friction
RCTClinical Trial
Firms easily transfer operational management practices between plants owned by the same company, but knowledge spillovers between independent competing firms remain extremely limited due to business secrecy and fear of poaching.
Picture this
Imagine a restaurant chain opening a second kitchen. The head chef willingly shares secret recipes and training logs with the new branch manager because both kitchens share profits. However, the chef refuses to share those recipes with the restaurant across the street out of fear of losing customers and staff.
What the evidence says
Nonexperimental plants within treatment firms increased management practice adoption by 17.5 percentage points without direct consulting, mirroring the 12.0 percentage point increase in control plants. Conversely, inter-firm spillovers were negligible: only 16% of 96 independent local firms had heard of the experiment and only 2% knew specific details, localized exclusively to Tarapur and Umbergaon.
- Who was studied
- 28 plants across 17 family-owned cotton textile firms in India (including 5 nonexperimental plants in treatment firms and 96 nonproject firms surveyed in the local industry around Mumbai).
- How
- Randomized Controlled Trial (RCT) tracking adoption rates in nonexperimental plants within treatment firms and a ground-based survey of 96 independent nonproject firms.
What to do
1. Replicate newly validated standard operating procedures from pilot production units across all secondary operational plants owned by the same corporate parent before attempting external licensing or benchmark disclosures.
From the source
"As a result, although spillovers across plants within firms occurred rapidly as shown in Figure V, spillovers between firms were very limited."
541 Management in India QJE.pdf