Management Traits as Embodied Human Capital: A Randomised Field Experiment in Ethiopia

This project seeks to advance the next generation of empirical studies on management in developing countries. First, it relates to a literature in organisational economics about heterogeneity in management, which distinguishes two prominent sources of heterogeneity: differences in managers’ traits and characteristics, and differences in management style. Second, the project aims to understand the determinants of the matching function of managers to firms in a low-income country, evidence of which does not exist to date. Third, the baseline survey acts as a long-term follow up on an earlier project on learning about management through an internship programme of young university graduates with established Ethiopian firms. A long-term follow up is very helpful since the path from learning an entrepreneurial skill to being able to use it in practice may take time and require experimentation.

The researchers will implement an incentivised matching experiment between firms and aspiring entrepreneurs/managers.  The experiment, to be implemented in Addis Ababa, serves three related purposes.  First, a novel experimental design provides for direct elicitation of both managerial skills and firms’ preferences over those skills. The experiment therefore offers a direct measure and decomposition of heterogeneity in management styles and preferences.  Second, the mechanism provides evidence regarding the matching of managerial skills to firms. Understanding how firms are matched with managers of different management styles is a prerequisite for formulating policies to improve the efficiency of manager-firm matching. Third, they will collect long-term follow-up data on a previous experiment concerning management practices, thereby assessing the long-term effect of exposure to different management practices on aspiring entrepreneurs/managers.

Improving the performance of larger firms – particularly in manufacturing – is a central concern to Ethiopian policymakers. For example, in Ethiopia’s current five-year Growth and Transformation Plan, reducing youth unemployment, through the expansion of the manufacturing sector and development of micro and small enterprises, has been cited as a key development objective to be meet in the planning period from 2015-2020. To tackle the twin problems of youth unemployment and poverty, the Ethiopian government has recently set up the Urban Job Creation and Food Security Agency.  EDRI in general, and Girum Abebe in particular, have been working closely with this agency since its establishment.  Other governments in Africa and bilateral and multilateral development agencies that work closely with EDRI also stand to benefit from this research.  Findings from this research will promote improved policy making in the areas of job creation and management knowledge diffusion.

Authors

Simon Quinn

University of Oxford

Girum Abebe

Ethiopian Development Research Institute

Michael Koelle

University of Oxford