DP15987 Management practices and resilience to shocks: Evidence from COVID-19

Author(s): Andrea Lamorgese, Andrea Linarello, Megha Patnaik, Fabiano Schivardi
Publication Date: March 2021
Keyword(s): COVID-19, firm performance, Management
JEL(s): D22, D24, L20, L25, M11
Programme Areas: Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15987

Do management practices help or harm firms when facing large shocks? Organizational practices can facilitate firms' responses to shocks through structured decision making, but also hinder them by constraining flexibility. We use the spread of COVID-19 in Italy, the first Western country hit by the pandemic, to investigate the role of management practices in responding to a large shock. We find a sizable, positive effect of management practices on firm performance: a one-standard deviation increase in the management score reduces the drop in year-ahead expected sales by 30 percent. Evidence points to the fact that better managed firms were more likely to implement changes in the organization of labor, and in particular to use remote work more intensely.