Management Quality and Innovation in Emerging Countries

I study the relationship between management quality and the innovation input and output of firms in ten emerging countries using data from the Management, Organization and Innovation (MOE Survey. I find that management quality is tightly associated with the decisions of firms to invest in R&D. An improvement in management quality from the 25th percentile to the median is associated with a 3.2 percentage point increase in the propensity to invest in R&D. Furthermore, there is a positive but weak association between management quality and product innovation. The empirical results for individual management practices show substantial heterogeneity. The findings hold after controlling for differences in management quality by industries. Additional analysis of management quality asymmetry shows that the results are driven mainly by firms with low quality management.