In a typical four-digit manufacturing industry in the United States, establishments at the 90th percentile of total factor productivity (TFP) are about twice as productive as those at the 10th percentile. This dispersion appears even larger in developing countries: for instance, Indian and Chinese firms display 400 percent productivity spread between the 10th and 90th percentile. These very large differences between plants are highly persistent, contributing to significant disparities in economic performance over time and across countries. 

While the popular press and business schools have long stressed the importance of good management, empirical economists have had relatively little to say about management practices. A major problem has been the absence of high-quality data on a large scale that follow the same firms over time. Moreover, the choice of whether to adopt management practices is made by firms themselves. Better-managed firms are more productive, but, at the same time, more productive firms adopt better management practices.