Management Practices and Resilience to Shocks: Evidence from COVID-19

Abstract

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.

JEL Classification: D22, D24, L20, L25, M11