How managerial autonomy improves firm outcomes: Evidence from India


Published 01.09.21

Greater managerial autonomy for state-owned enterprises leads to higher sales, profits, and value added, with no negative employment effects

Read “The impacts of managerial autonomy on firm outcomes” by Namrata Kala here.

Delegation and autonomy for managers can have significant implications for firms’ overall growth and profits. However, empirical evidence on managerial autonomy is often difficult to acquire due to challenges in disentangling autonomy from other organisational restructuring. In this VoxDevTalk, Namrata Kala discusses her recent work examining the long-run effects of a natural experiment in India which gave greater autonomy to profitable state-owned enterprises (SOEs) in the late 1990s. 

Kala studies the impact of a government programme that granted greater independence from government oversight for profitable SOEs in the areas of capital expansion, labour restructuring, and joint ventures and subsidiaries. She finds that firms granted autonomy had large and significant increases in sales, profit, value added, and productivity. More importantly, these results compounded over time as firms’ investments bore fruit, with no reductions in employment.