better-paying jobs for those with skills appropriate to the technological advance, fewer jobs for those without, and greater returns for the managers and investors. Such a result is perhaps consistent with growth, but not directly consistent with inclusive growth.

In contrast, a firm that operates in a competitive business environment is strongly motivated by higher returns to expand aggressively when it has attained lower costs or higher value products from innovation and heightened TFP. Not only does the innovative firm profit by adapting its production technology, but it profits all the more by selling more intensively and more widely through the lower prices or better marketing and distribution that its lower costs and better products make commercially possible. This innovation-driven growth is likely inclusive in that the expansion of the firm‘s production needs unskilled labor as well as labor with advanced skills, and the firm‘s enhanced market opportunities provide the needed financial impetus for more and better jobs across the spectrum.

Firms with the ability to expand in reaction to their advances in TFP and process and product innovation are more able to profit from their technological progress, and hence are more likely to make the effort and to commit the funding needed to succeed with innovation. And economic logic indicates that firms with that ability to expand are more likely to grow inclusively as a result of innovations or gains in TFP they may accomplish. Thus, we hypothesize that, on average, there is a selection bias that favors inclusive growth from innovation. Our empirical analyses below seem to confirm that hypothesis, along with the more direct logic that innovation tends to be expansionary at the level of the enterprise.

In all market environments, and particularly in developing economies, management upgrading is now appropriately perceived as a crucial innovative technology, and one with additional connections to inclusive growth. It was only with the recent quantification of specific improvements in management practices, such as better ways to monitor production information, to set binding operations, inventory and quality control targets, and to incentivize workers with merit-based pay and promotion, that it has become possible for economists to rigorously compare management technologies across firms. Based on data across 17 countries, Bloom and Van Reenen (2010) rank average Indian, Chinese and Brazilian management practices of domestic firms (the only developing countries in the sample) as significantly below those of OECD countries, with a large lower tail of very badly-managed firms; foreign multinationals residing in these countries, on the other hand, are well managed across all countries. Robust positive associations are found between the average firm management score and labor productivity (sales per employee), profitability, Tobin‘s q, sales growth and survival, controlling for country and industry fixed effects and general firm-level controls. And in a follow-on randomized experiment on large multi-plant Indian textile firms, Bloom et al. (2011) show the causal impact of adopting better management technologies: five months of extensive consulting to upgrade management practices raised average TFP by 11% in the first year, increased the use 12