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Delegation, Skill Acquisition and Turnover Costs

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  • Maria De Paola
  • Vincenzo Scoppa

Abstract

The delegation of tasks to a subordinate and his access to key firm resources allow an organization to make optimal use of his knowledge and ability, but at the same time, thanks to on-the-job learning and the possibility of expropriation of these resources, this might increase the agent's outside options. We model these risks as an increase in the quit propensity of the agent which determines higher turnover costs for the firm. The choice of the degree of delegation a principal offers to her subordinate is analyzed taking into account its benefits and costs. We show that the level of delegation is influenced by the principal's and the agent's abilities, but it is lower the higher turnover costs are and the lower the degree of specificity of human capital is or the higher the degree of expropriability of resources is. Finally, bureaucratic rules establishing the documentation of the agent's activity are seen as a device to reduce turnover costs and to allow more delegation.

Suggested Citation

  • Maria De Paola & Vincenzo Scoppa, 2007. "Delegation, Skill Acquisition and Turnover Costs," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(1), pages 111-133.
    • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:1:p:111-133
    DOI: 10.1080/13571510601097173
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    References listed on IDEAS

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    1. Hvide, Hans K. & Kaplan, Todd, 2003. "Delegated Job Design," CEPR Discussion Papers 3907, C.E.P.R. Discussion Papers.
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