Lean Implementation and Managerial Ability-Evidence from the Healthcare Industry

This study examines the relationship between lean implementation and managerial ability in the healthcare industry. Using a panel data set from U.S. short-term, general, acute care hospitals from 2000 to 2015, we conduct unidirectional analysis and two-stage Probit least squares regression to investigate whether lean implementation improves managerial ability and the possible two-way relation lean implementation and managerial ability. We find evidence that lean implementation and managerial ability are simultaneously determined. In addition, we quantify the simultaneity bias by comparing the 2PSLS regression results to those results using unidirectional approach. The findings of this study are of great interest to hospital decision makers and researchers as they assess the benefits of lean implementation and managerial ability. Specifically, the study provides implications to managers in hospitals as it suggests the importance of considering the possible simultaneity bias as they make informed lean implementation decisions. Any policy to improve lean implementation is likely to succeed if it takes into consideration managerial ability, and vice versa.