Firm productivity is a core engine of growth, and yet the drivers of workers’ productivity in firms in developing countries remain largely unknown. The inability to motivate workers is likely to be a major constraint in the transformation from a rural to an urbanised economy with a large share of manufacturing employment. Recent survey evidence shows that the most profitable and productive firms in developed economies tend to adopt personnel policies that link pay to performance and provide discretion to managers. However, rigorous field evidence demonstrating the effectiveness of such practices is available only for the US and UK. There is no clear understanding of the root causes of these differences and, consequently, no evidence that management practices that are effective in Anglo-Saxon countries would be equally effective in countries with different institutional histories.
Evidence on how such incentives work in different cultural settings is of critical importance for promoting productivity enhancing personnel practices and encouraging growth in the private sector. To shed light on the issue, this project implements an identical field experiment in several different countries across Asia and Africa to test whether the response to different human resource practices (incentives, delegation, and job design) varies across countries depending on pre-existing cultural differences, and to identify which compensation schemes are more effective in different cultural environments.
