Managerial Span of Control and Delegation Constraints
RCTClinical Trial
Low inter-firm trust and weak legal enforcement prevent firm owners from delegating authority to non-family managers, restricting total firm expansion to the direct oversight capacity of male family members.
Picture this
Think of a fruit orchard where the owner only trusts close family members to water the trees because the owner fears hired workers will steal the fruit. Regardless of market demand for apples, the orchard cannot grow larger than the physical watering capacity of the owner's immediate family.
What the evidence says
The supply of male family members was more than three times more important in explaining firm size than management practice scores (R-squared reduction of 10.1% versus 3.3%). Adopting systematic management practices increased delegation to plant managers (z-score coefficient 0.103, p < 0.05) and led treatment firms to open 0.217 to 0.259 additional plants compared to control firms and industry baselines.
- Who was studied
- 28 textile plants across 17 family-owned firms in India, alongside a broader survey sample of 113 textile firms around Mumbai.
- How
- Randomized Controlled Trial (RCT) evaluating plant manager autonomy scores, spending thresholds, and plant count expansion over a 3-year post-treatment horizon.
What to do
1. Standardize operational reporting metrics so plant directors can delegate purchasing and hiring decisions to plant managers while monitoring performance remotely.
From the source
"Not surprisingly, we found that the number of male family members had more than three times the explanatory power for firm size as their management practices."
541 Management in India QJE.pdf