Current Issue

Seoul Journal of Economics - Vol. 34 , No. 2

[ Article ]
Seoul Journal of Economics - Vol. 34, No. 2, pp.265-302
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 30 May 2021
Received 30 Dec 2020 Accepted 26 Jan 2021

Heterogeneous Entrepreneurs and Managerial Delegation in an Open Economy
Yang Seung Lee
Yang Seung Lee, Associate Professor, Department of International Trade, Kunsan National University, 558 Daehak-ro, Gunsan-si, Jeollabuk-do, 54150, Korea, Tel: 82-63-469-4502 (

JEL Classification: F12, L11, J24


This study examines the impact of firm-level managerial delegation on aggregate economy. First, managerial delegation demands skilled labor and hence affects the labor market. Second, managerial delegation also affects the product market by improving production efficiency. Managerial delegation incurs costs but does not equally benefit firms. Higher entrepreneurial-skill entrepreneurs are selected, which dramatizes the firm size distribution. These entrepreneurs run larger and more productive firms, and contribute to the aggregate economy by creating higher-paying jobs. This paper provides new implication of trade gain, which is larger for the country where managerial delegation is easier.

Keywords: Entrepreneurial Skill, Decentralization, Firm Heterogeneity, Management, Monopolistic Competition

1. Bloom, Nicholas., Brynjolfsson, Erik., Foster, Lucia., Jarmin, Ron., Patnaik, Megha., Saporta-Esksten, Itay. and Van Reenen, John. “What Drives Differences in Management Practices?” American Economic Review 195 (No. 5 2019): 1648-1683
2. Bloom, Nicholas., Eifert, Benn, Mahajan, Aprajit, McKenzie, David, and Roberts, J. “Does Management Matter? Evidence from India.” Quarterly Journal of Economics 128 (No.1 2013): 1-51.
3. Bloom, Nicholas, Manova, Kalina, Van Reneen, John, Sun, Stephen Ten, and Yu, Zhihong. “Trade and Management.” Review of Economics and Statistics (Forthcoming).
4. Bloom, Nicholas, and Van Reenen, John. “Why Do Management Practices Differ Across Firms and Countries?” Journal of Economic Perspective 24 (No.1 2010): 203-224.
5. Bloom, Nicholas, and Van Reenen, John. “Human Resource Management and Productivity.” NBER Working Paper 16019, 2010.
6. Bloom, Nicholas, Sadun, Raffaela, Van Reenen, John. “The Organization of Firms Across Countries.” Quarterly Journal of Economics 127 (No. 4 2012): 1663-1705.
7. Bloom, Nicholas, Sadun, Rafaella, and Van Reenen, John. “Management as a Technology.” Working Paper 16-133, Havard Business School, 2017.
8. Brynjolfsson, Erik, and Milgrom, Paul. Complementary in Organization. Handbook of Organizational Economics. Princeton University Press, 2013.
9. Bustos, Paula. "Trade liberalization, exports, and technology upgrading: Evidence on the impact of MERCOSUR on Argentinian firms." American economic review 101 (No. 1 2011): 304-40.
10. Caroli, Evan, and Van Reenen, John. “Skill-Biased Organization Change? “Evidence from a Panel of English and French Establishments.” Quarterly Journal of Economics 116 (No. 4 2001): 1449-1492.
11. Crawford, Christopeher, Aguinis, Herman, Lichtenstein Benyamin, Davisson Per, and McKelvey, Bill. “Power Law Distributions in Entrepreneurship: Implications for Theory and Research.” Journal of Business Venturing 30 (No. 5 2015): 696-713.
12. Guadalupe, Maria, and Wulf, Julie. “The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies.” American Economic Journal: Applied Economics 2 (No.4 2010): 105-127.
13. Kihlstrom, Richard. E., and Laffont, Jean-Jacques. “A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion.” Journal of Political Economy 87 (No. 4 1979): 719-748.
14. Lucas, Robert E. “On the Size Distribution of Business Firm.” Bell Journal of Economics 9 (No. 2 1978): 508-523.
15. Melitz, Mark J. “The Impact of Trade on Intra-Industry Reallocation and Aggregate Industry Productivity.” Econometrica 71 (No. 6 2003): 1695-1725.
16. Monte, Ferdinando. “Skill Bias, Trade and Wage Dispersion.” Journal of International Economics 83 (No. 2 2011): 202-218.
17. Niem, Le Duc, and Kim, Taegi. “Trade of Vertically Differentiated Products, Quality Improvement, and Welfare.” Seoul Journal of Economics 30 (No. 2 2020): 99-119.
18. Poschke, Markus. “Who Becomes an Entrepreneur? Labor Market Prospects and Occupational Choice.” Journal of Economic Dynamics & Control 37 (No. 3 2013): 693-710.
19. Poschke, Markus. “The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology.” American Economic Journal: Macroeconomics 10 (No. 3 2018): 1-41.
20. Rajan, Raghuram, and Wulf, Juile. “The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies.” Review of Economics and Statistics 88 (No. 4 2006): 759-773.
21. Samson, Thomas. “Selection into Trade and Wage Inequality.” American Economic Journal: Microeconomics 6 (No. 3 2014): 157-202.
22. Samson, Thomas. “The Divide between Subsistence and Transformational Entrepreneurship”, Innovation Policy and the Economy 10 (No.1 2010): 57-81.
23. Syverson, Chad. “What Determines Productivity?” Journal of Economic Literature 49 (No. 2 2011): 326-365.