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That is what Friends do: Employee Friendliness and Innovation
Abstract
Recent literature suggests that labor related issues can impact corporate innovation. In this study we hypothesize and find that firms with congenial work environments innovate more and have greater innovative efficiency. Our results also suggest that cash profit sharing and employee involvement have a positive bearing whereas union relationships have a negative impact on innovation output of a firm. In addition, subsample analysis reveals that employee-friendly policies are more important in industries having higher employee power. Our results are consistent with the logic that happy and satisfied employees tend to be more productive than the unhappy and dissatisfied ones. Our work suggests a channel through which satisfied employees contribute towards increasing firm value − by increasing the innovation productivity and efficiency of the firm. So, firms must make continued efforts towards creating and maintaining a friendly work environment.
... Abraham (2012) señala que los empleados con apego emocional y pasión por el trabajo son los más capaces para innovar. Como esta satisfacción es fundamental para la capacidad innovativa, las empresas crean mecanismos para la retener a los empleados (Adhikari, Choi, & Sah, 2017) y acumular conocimiento en el largo plazo, mediante el learning-by-doing. ...
... Estas dimensiones promueven las habilidades de innovación en el individuo y, en consecuencia, facilitan la creación de novedades para el mercado. Este resultado es consistente con otros estudios, por ejemplo, el nivel de estudios del trabajador (Fransen, 2013), las empresas con presencia femenina (Torchia et al., 2018), los propietarios de las empresas -y sus familias- (Minetti et al., 2015), y trabajadores satisfechos y su permanencia en la empresa (Adhikari et al., 2017) se relacionan positivamente con la capacidad innovativa. ...
Una alternativa de las micro y pequeñas empresas (mypes) para competir es la innova-ción basada en las personas como componente clave. El presente documento mide las habilidades de innovación a través del Índice General de Habilidades de Innovación en el Individuo (ighii) con siete dimensiones básicas. Se contrasta el índice en una muestra de 1.010 mypes de la Zona Metropolitana del Valle de México. Se realiza un análisis factorial para establecer la estructura del indicador y, mediante una regresión logit, se estiman los determinantes de las habilidades de inno-vación. Con base en los resultados, se encuentra que educación, género, antigüedad en la empresa y puesto laboral del individuo, así como tamaño y años de operación de la empresa son factores positivos de estas habilidades. Una implicación para la política pública es el fomento de las mypes con individuos con estos atributos.
... Many previous studies have identified the importance of working conditions for enterprises' sustainable development. Delmas [27], Ahmed [28], Adhikari [29], Sharma [30], Chen [31], and Sauermann [32] agreed that applying new technology, approaching new production processes, or inventing new products are the root of sustainable development. Equality and recognition in the workplace motivate workers to participate more in organizational initiatives. ...
Better working conditions promote employee creativity and loyalty. Meanwhile, a stable and skilled workforce contributes to a firm’s sustainable growth. Therefore, providing favorable working conditions is one of the critical sustainable goals of many countries worldwide. However, some critics are concerned participating in international trade causes worsening employment conditions in developing countries. Driven by these concerns, the relationship between exports and labor conditions is worth illuminating. This study adopts the data from Vietnam’s small and medium-sized manufacturing enterprises (SMEs). The dataset was collected by the Ministry of Labour, Invalids and Social Affairs (MOLISA) and the University of Copenhagen, UNU-WIDER from 2011 to 2015. Unlike previous studies, this study clusters firms by export status, including four groups: non-exporting, consecutive exporting, start-exporting, and exit-exporting. Observing dynamic exports sheds light on the effects of export decisions more thoroughly than the static export. Another contribution, this study focuses on an essential aspect of working conditions: providing fringe benefits. Subsequently, the analysis is upgraded by controlling for firm constraints as interaction variables. A major constraint and financial constraint are adopted to proxy for a firm’s constraints. This work promotes assessments to be more accurate, thereby providing more valuable information to policymakers. Finally, a robustness test is applied to each type of fringe benefit. Instrumental variables are used to solve the problem of endogeneity. The results found that exporting firms provide better working conditions. Additionally, constrained firms have worse working conditions.
... The transfer of technology has different forms: acquisition of patents or licenses (Jiang & Iii, 2010); mergers, acquisition or joint-ventures operations; acquisition of machines, equipment and components; reverse engineering; analysis of information contained in the catalogues of products, publications or presented at congresses, and hiring technicians from competing companies (Almario, 2018). The oncoming evolution of the intensive interaction between innovation transformation-such as technology transfer in the application of the ownership right transfer between the employer and employees (Aerts, Kraft, & Lang, 2015), that is, the innovation creators (Adhikari, Choi, & Sah, 2017)-and their practitioners requires monitoring of legislation that directs the productivity and potential economic consumption (Irani, 2010). Internationalization (Archibugi & Michie, 1995) of the whole system starts showing an upward trend in obtaining the right to apply economic value on a global scale (Molero & Garcia, 2008). ...
This paper presents a conceptual discussion focused on the basic vision of science and technology, which is the primary purpose and reference framework of the produced United Nations’ documents and the Sustainable Development Goals (SDGs) of the 2030 Agenda. The most important intention and the objective of these documents is the technology transfer, which carries a risk of not recognizing other technological options-such as eco-technology-and the limited role representing science and innovation in the achievement of these Sustainable Development Goals. We focused on the broader aspects of international patent law approaches that approximate to incentives of technological transfer and innovation process. This article contributes to the theoretical overview of patent law in the application process of intellectual property use in the international context. In conclusion, we discussed, according to the literature review, the possibility of maintaining the environment by considering technological transfer and innovation process as solutions for world disasters. Sustainable development goals are proposed for the same prevention, which should be clear for every country in the world.
... Companies with better worker treatment regarding safety, employee relations, and diversity produce more relevant patents, even better than those with lots of expertise. The study of employee friendliness and innovation by Adhikari et al. also suggested that cash profits and employee involvement have a positive impact on the innovation output of a firm [28]. In aligning with the fact that the more satisfied employees the better the productivity of a firm, the results of this study stress that employee-friendly policies elevate employee power in increasing the innovation productivity. ...
As the fourth industrial revolution has been emerging, there are concerns of labor forces being replaced by technology, recent interest on the work-life balance, and the quality of employment has received attention. This study investigates the role of technology startups on employment and innovative performance. Using empirical data from workplace panel data provided by the Korea Labor Institute, this study reveals that technology startups impact the employment quality and innovative performance by the action of technological innovation. The results highlight the quality of employment as a driver for innovative performance in technology startups. The results of this study will provide practical implications for enhancing technology entrepreneurship.
... Psychological contract with HR practices and policies have been examined to have a positive relationship with organizational performance (Suh, Shim, & Button, 2018). This implies that improved HR practices can lead to higher psychological contracts fulfillment, which will intend to bring out improved employee attitudes and will increased organizational performance (Adhikari, Choi, & Sah, 2017). We, therefore, hypothesize that; ...
This paper aimed at examining the effects of employees’ psychological contract fulfillment, employees’ job satisfaction on organizational performance from some selected companies on the Ghana Stock Exchange (GSE). Many Companies today have invested more into their organization to achieve Psychological Contract between them and their employees, and other important stakeholders of the company. Random sampling was used to select top employees from selected companies on the Ghana Stock Exchange. Structured questionnaires were used for the collection of data. Based on the analysis, the researcher realized that there is a significant positive relationship between psychological contract fulfillment and employee’s job satisfaction. It also revealed that there is a significant positive relationship between psychological contract fulfillment and organizational performance. Finally, the research revealed that, there is a significant positive relationship between employee’s job satisfaction and organizational performance.
... Employee treatment is directly related to firm performance (Edmans, 2011;Faleye and Trahan, 2011), including capital structure decisions (Bae et al., 2011;Verwijmeren and Derwall, 2010) or acquisition performance (Ertugrul, 2013). Better working environments yield higher corporate innovation (Mao and Weathers, 2015;Adhikari et al., 2016;Chen et al., 2016) and innovation is also higher for a firm which promotes workplace diversity (Mayer et al., 2016;Gao and Zhang, 2016). ...
In this study, we examine the relation between employee lawsuit and risk in U.S. public firms. We hand collect more than 20,000 employee lawsuits and find that labor-related allegations significantly affect firm risk after controlling for various firm characteristics. We document that a greater number of employee litigation increases firm risk. Our results remain robust when we use alternative measures of employee lawsuits, including other work-related complaints, violations, disputes, and allegations. Our study reveals that case characteristics - charging parties, outcomes, and duration - play a significant role in defining the firm risk. Our results show the importance of employee treatment which may have important implications for policy makers and business owners.
This study examines the impact of employee treatment on family business innovation. Our empirical research shows that beneficial employee treatment can increase family business innovation input and output. Moreover, the empirical conclusions pass the robustness and endogeneity tests. An additional analysis shows that non-salary aspects of employee treatment can significantly increase the quantity and quality of innovation output; however, they have little to no impact on innovation input. Further, we find that the higher the levels of trust in society, trust in organizational decisions, and trust in co-workers are, the stronger is the role of employee treatment in family business innovation.
This study examines the impact of employee relations issues on the reputation of the board of directors and the executive officer (CEO). We utilize a unique, hand-collected dataset of employee disputes, including lawsuits, complaints, health and safety inspections, and wage-hour-benefit violations. We show that, when firms engage in employee mistreatment, both directors and CEOs are punished by deterioration in their reputation, as proxied by a reduced number of outside seats. In addition, we document that case characteristics, such as settlement fees, attorney fees, case duration, and case outcome, can play an important role in the CEO’s diminished reputation and losing extra board seats. Overall, our results provide evidence supporting an association between employee workplace treatment and the individual reputations of directors and CEOs.
Research has established that research and development (R&D)-intensive firms are characterized by substantial future risk-adjusted stock returns. The reasons for this phenomenon and its policy implications, however, are widely debated. Some attribute the excess returns to investors' systematic undervaluation of R&D firms and argue for improved disclosure to mitigate the mispricing. whereas others claim that the excess returns are just compensating for an R&D-speciftc risk factor
We aim to provide insights into this controversy by examining R&D firms with substantial R&D outlays, that is, firms with R&D as an important ingredient in their strategy. Among such firms, we compare firms with high and low industry-adjusted R&D intensity. The high industry-adjusted R&D intensity firms are more likely to engage in basic research activities, whereas the low Indus try-adjusted R&D intensity firms are likely to mimic and extend existing technologies. As such, compared with the low industry-adjusted R&D intensity firms, the high industry-adjusted R&D intensity firms are likely to suffer from higher information asymmetry. We find that high industry-adjusted R&D intensity firms generate larger risk-adjusted returns compared with low industry-adjusted R&D intensity firms in the first five future years, after which the excess returns for the high group converge to those of the low group in the long run. This reversal in returns is consistent with undervaluation of high industry-adjusted R&D intensity firms. The long-term excess returns are positive for both the high and the low industry-adjusted R&D intensity firms, and these excess returns are partly attributable to information risk. We also show that the future excess returns of high industry-adjusted R&D intensity firms are lower for those firms who provide voluntary disclosure (earnings guidance) suggesting that the short-term undervaluation is likely due to mispricing.
Evidence on the “funding gap“ for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for VC exit are not highly developed. We conclude by suggesting areas for further research.
We review 74 experiments with no, low, or high performance-based financial incentives. The modal result has no effect on mean performance (though variance is usually reduced by higher payment). Higher incentive does improve performance often, typically judgment tasks that are responsive to better effort. Incentives also reduce presentation effects (e.g., generosity and risk-seeking). Incentive effects are comparable to effects of other variables, particularly cognitive capital and task production demands, and interact with those variables, so a narrow-minded focus on incentives alone is misguided. We also note that no replicated study has made rationality violations disappear purely by raising incentives.
As corporate managers interact with non-shareholder stakeholders, potential tradeoffs emerge and questions arise as to how
these interactions impact shareholder value. We argue that this shareholder–stakeholder debate is an important issue within
the overall corporate governance and corporate policy domain and examine one such stakeholder group – employees – by studying
labor-friendly corporate practices. We find that announcements of labor-friendly policies are associated with positive abnormal
stock returns. Labor-friendly firms also outperform otherwise similar firms, both in terms of long-run stock market returns
and operating results. In addition, we find that the probability and benefits of labor-friendliness increase with the demand
for highly skilled labor. Our analysis of excess executive compensation suggests that top management derives no pecuniary
benefits from labor-friendly practices. We interpret our results as consistent with a genuine concern for employees translating
into higher productivity and profitability, which in turn facilitate value creation. It appears that the benefits of labor-friendly
practices significantly outweigh the costs and that what is good for employees is good for shareholders.
Keywordscorporate social responsibility–employee stakeholders–stakeholder theory–agency theory
We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas
by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for
this claim by employing patents as a proxy for innovation. Using time-series changes within a country and cross-country variation
in creditor rights, we confirm that a creditor-friendly code leads to a lower absolute level of innovation by firms, as well
as relatively lower innovation by firms in technologically innovative industries. When creditor rights are stronger, technologically
innovative industries employ relatively less leverage and grow disproportionately slower.
This paper summarizes a number of studies which use patent data to examine different aspects of technological change. It describes our firm level data set construction effort; reports on the relationship between RLD expenditures and the level of patenting; analyzes the relationship between patents, R&D, and tire stock market value of firms; reports on the estimation of the value of patent rights based on European patent renewal data; and describes the use of patent data to estimate the importance of R&D spillovers. It concludes that patent data represent a valuable resource for the analysis of technological change. They can be used to study longer-run interfirm differences in inventive activity and as a substitute for R&D data where they are not available in the desired detail. It is possible also to use a firm's distribution of patenting by field to infer its position in "technological space" and use it in turn to study how R&D spills over from one firm to another. Moreover, patent renewal data, which are also becoming available in the U.S., allow one to construct more relevant "quality weighted" inventive "output" measures .
Exxon Mobil and ConocoPhillips stock price has been predicted using the difference between core and headline CPI in the United States. Linear trends in the CPI difference allow accurate prediction of the prices at a five to ten-year horizon.
We identify firm innovation as a new channel by which employee treatment affects firm value. Growth and innovation incentive theories support positive effects of “good” employee treatment on innovation. Alternatively, entrenchment theory suggests such treatment will lead to complacency and shirking, hence deterring innovation. These opposing views merit investigation since in the “new economy,” human capital is increasingly essential to firm value and the growth and success of a firm has become more reliant on corporate innovation. Using the KLD Research & Analytics, Inc. SOCRATES database and newly acquired patent/citation data, we find an overall significant positive relationship between positive employee treatment and innovation input (R&D), quantity (Patents), and quality (Citations). Furthermore, we find that favorable employee treatment improves innovation focus – innovation projects more related to firms’ core business. These findings, robust to an alternate data source and endogeneity concerns, are consistent with the theories of growth and innovation incentive and suggest corporate innovation represents a channel by which employee treatment enhances firm value.
This paper investigates the effect that employee treatment schemes have on corporate innovation performance. We find that firms with better employee treatment schemes produce more and better patents through improving employee satisfaction and teamwork. Additional tests suggest that our main findings cannot be attributed to job security, unionization, reverse causality, and omitted variables. We also find that firms with better employee treatment schemes produce patents that enhance market valuation and facilitate better future operating performance. Collectively, our findings show that treating employees well benefits firms and shareholders, for well treated employees are encouraged to create intellectual property.
Introduction In the standard economic treatment of the principal–agent problem, compensation systems serve the dual function of allocating risks and rewarding productive work. A tension between these two functions arises when the agent is risk averse, for providing the agent with effective work incentives often forces him to bear unwanted risk. Existing formal models that have analyzed this tension, however, have produced only limited results. It remains a puzzle for this theory that employment contracts so often specify fixed wages and more generally that incentives within firms appear to be so muted, especially compared to those of the market. Also, the models have remained too intractable to effectively address broader organizational issues such as asset ownership, job design, and allocation of authority. In this article, we will analyze a principal–agent model that (i) can account for paying fixed wages even when good, objective output measures are available and agents are highly responsive to incentive pay; (ii) can make recommendations and predictions about ownership patterns even when contracts can take full account of all observable variables and court enforcement is perfect; (iii) can explain why employment is sometimes superior to independent contracting even when there are no productive advantages to specific physical or human capital and no financial market imperfections to limit the agent's borrowings; (iv) can explain bureaucratic constraints; and (v) can shed light on how tasks get allocated to different jobs.
This paper reports a meta-analytic literature review testing cognitive, affective, and contingency models of the effects of participation in decision making on employees' satisfaction and productivity. Contingency models received no support. Results from field studies provided some support for cognitive models, and strong support for affective models linking participative climate with worker satisfaction. Methodological variations such as research setting and type of participant were important moderators in subgroup analyses. We discuss the implications of such variations for task complexity.
Economists studying innovation and technological change have made significant progress toward understanding firms' profit incentives as drivers of innovation. However, innovative performance in firms should also depend heavily on the pecuniary and nonpecuniary motives of the employees actually working in research and development. Using data on more than 1,700 Ph.D. scientists and engineers, we examine the relationships between individuals' motives (e.g., desire for intellectual challenge, income, or responsibility) and their innovative performance. We find that motives matter, but different motives have very different effects: Motives regarding intellectual challenge, independence, and money have a strong positive relationship with innovative output, whereas motives regarding job security and responsibility tend to have a negative relationship. We also explore possible mechanisms underlying the observed relationships between motives and performance. Although hours worked (quantity of effort) have a strong positive effect on performance, motives appear to affect innovative performance primarily via other dimensions of effort (character of effort). Finally, we find some evidence that the role of motives differs in upstream research versus downstream development.
We find a positive relation between mergers and acquisitions (M&A) activity of a firm and its subsequent innovation outcome measured by the number and the novelty of the patents the firm obtains. The positive relation between M&A activity and innovation appears at least as significant as that between R&D and innovation. To identify causality between M&A activity and innovation, we compare the innovation output of failed acquirers to that of successful acquirers and find that failed acquirers obtain fewer patents and patents with lower impact relative to successful acquirers. Acquiring innovative target firms with existing patents is positively related to acquirer abnormal returns at announcement as well as acquirer’s long-term stock return performance after deal completion. Overall, our paper uncovers a previously undocumented role of M&A and suggests that acquiring innovation is an important motive for undertaking M&A.
The discussion about employee representation on supervisory boards has received much attention from scholars and politicians around the world. We provide new insights to this ongoing debate by employing power indices from game theory to examine the real power of employees on boards and its effect on firm performance. Based on unique panel data of the largest listed companies in Germany, we find an inversely U-shaped relationship between labour power and Tobin's Q with a value-maximising labour power of approximately 43 %. Our results are robust to different game theoretical calculations of labour power, as well as various econometric models. -- Die Diskussion über Arbeitnehmermitbestimmung in Aufsichtsräten hat erhebliche Aufmerksamkeit von Wissenschaftlern und Politiker in vielen Ländern erfahren. Wir tragen neue Einsichten zu dieser fortdauernden Debatte bei, indem wir spieltheoretische Machtindices verwenden, um die Macht von Beschäftigten und deren Beitrag zum Unternehmenserfolg zu bestimmen. Mit originären Paneldaten der größten deutschen gelisteten Unternehmen finden wir eine umgekehrt U-förmige Beziehung zwischen Arbeitnehmermacht und Tobin's Q, wobei die wertmaximierende Arbeitnehmermacht bei rund 43 % liegt. Unsere Ergebnisse sind robust sowohl hinsichtlich unterschiedlicher spieltheoretischer Berechnungen der Arbeitnehmermacht als auch verschiedener ökonometrischer Modellierungen.
We examine the impact of individual-level motives upon innovative effort and performance in firms. Drawing from economics and social psychology, we develop a model of the impact of individuals' motives and incentives upon their innovative effort and performance. Using data on over 11,000 industrial scientists and engineers (SESTAT 2003), we find that individuals' motives have significant effects upon innovative effort and performance. These effects vary significantly, however, by the particular kind of motive (e.g., desire for intellectual challenge vs. pay). We also find that intrinsic and extrinsic motives affect innovative performance even when controlling for effort, suggesting that motives affect not only the level of individual effort, but also its quality. Overall, intrinsic motives, particularly the desire for intellectual challenge, appear to benefit innovation more than extrinsic motives such as pay.
This paper investigates the relationship between the employee-friendly practices of the acquiring firm and the acquisition performance. I find a positive relationship between employee friendliness of the acquirer and acquisition performance. Employee friendliness of the acquirer is also positively linked to acquisition completion probabilities and completion speeds. The effect of employee-friendly policies on performance is stronger for human capital intensive firms. The positive relationship between employee friendliness and acquisition performance is robust to an alternative measure of employee friendliness and endogeneity corrections. The results reflect the importance of human capital and employee-related policies for the long-term success of an acquisition.
We find that innovative efficiency (IE), patents or citations scaled by R&D, is a strong positive predictor of future returns after controlling for firm characteristics and risk. The IE-return relation is associated with the loading on a mispricing factor, and the high Sharpe ratio of the Efficient Minus Inefficient (EMI) portfolio suggests that mispricing plays an important role. Further tests based upon attention and uncertainty proxies suggest that limited attention contributes to the effect. The high weight of the EMI portfolio return in the tangency portfolio suggests that IE captures incremental pricing effects relative to well-known factors.
We show that wrongful discharge laws—laws that protect employees against unjust dismissal—spur innovation and new firm creation.
Wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability
to hold up innovating employees after the innovation is successful. By reducing the possibility of holdup, these laws enhance
employees'innovative efforts and encourage firms to invest in risky but potentially mould-breaking projects. We develop a
model and provide supporting empirical evidence of this effect using the staggered adoption of wrongful discharge laws across
U.S. states.
We examine how financial market development affects technological innovation. Using a large data set that includes 32 developed and emerging countries and a fixed effects identification strategy, we identify economic mechanisms through which the development of equity markets and credit markets affects technological innovation. We show that industries that are more dependent on external finance and that are more high-tech intensive exhibit a disproportionally higher innovation level in countries with better developed equity markets. However, the development of credit markets appears to discourage innovation in industries with these characteristics. Our paper provides new insights into the real effects of financial market development on the economy.
Motivating innovation is important in many incentive problems. This paper shows that the optimal innovation-motivating incentive scheme exhibits substantial tolerance (or even reward) for early failure and reward for long-term success. Moreover, commitment to a long-term compensation plan, job security, and timely feedback on performance are essential to motivate innovation. In the context of managerial compensation, the optimal innovation-motivating incentive scheme can be implemented via a combination of stock options with long vesting periods, option repricing, golden parachutes, and managerial entrenchment.
We find that while there is no unambiguous support for the Schumpeterian hypothesis, the determinants of innovation are generally similar for large and small firms.
This paper analyzes the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the “100 Best Companies to Work For in America” earned an annual four-factor alpha of 3.5% from 1984 to 2009, and 2.1% above industry benchmarks. The results are robust to controls for firm characteristics, different weighting methodologies, and the removal of outliers. The Best Companies also exhibited significantly more positive earnings surprises and announcement returns. These findings have three main implications. First, consistent with human capital-centered theories of the firm, employee satisfaction is positively correlated with shareholder returns and need not represent managerial slack. Second, the stock market does not fully value intangibles, even when independently verified by a highly public survey on large firms. Third, certain socially responsible investing (SRI) screens may improve investment returns.
Within the German corporate governance system, employee representation on the supervisory board is typically legally mandated. We propose that such representation of labor on corporate boards confers valuable first-hand operational knowledge to corporate board decision-making. Indeed, we find that labor representation provides a powerful means of monitoring and reduces agency costs within the firm. Moreover, we show that the greater the need for coordination within the firm, the greater the potential improvement there is in governance effectiveness through the judicious use of labor representation. These benefits do not appear to hold for union representatives.
In this chapter we argue that the endogenous growth model with quality-improving innovations provides a framework for analyzing the determinants of long-run growth and convergence that is versatile, simple and empirically useful. Versatile, as the same framework can be used to analyze how growth interacts with development and cross-country convergence and divergence, how it interacts with industrial organization and in particular market structure, and how it interacts with organizations and institutional change. Simple, since all these aspects can be analyzed using the same elementary model. Empirically useful, as the framework generates a whole range of new microeconomic and macroeconomic predictions while it addresses empirical criticisms raised by other endogenous growth models in the literature.
In this paper we investigate the effect of local banking development on firms’ innovative activities, using a rich data set on innovation for a large number of Italian firms over the 1990s. There is evidence that banking development affects the probability of process innovation, particularly for firms in high-tech sectors, in sectors more dependent upon external finance, and for firms that are small. The evidence for product innovation is much weaker and not robust. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.
I evaluate the effect of loyalty on individuals' portfolio choice using a unique dataset of retirement contributions. I exploit
the statutory difference that, in 401(k) plans, stand-alone employees can invest directly in their division, while conglomerate
employees must invest in the entire firm, including all unrelated divisions. Consistent with loyalty, employees of stand-alone
firms invest 10 percentage points (75%) more in company stock than conglomerate employees. Support is also found using variation
in loyalty between different groups of employees, across and within firms. The cost to employees of loyalty is large, amounting
to nearly a 20% loss in retirement income.
We review 74 experiments with no, low, or high performance-based financial incentives. The modal result is no effect on mean performance (though variance is usually reduced by higher payment). Higher incentive does improve performance often, typically judgment tasks that are responsive so better effort. Incentives also reduce "presentation" effects (e.g., generosity and risk-seeking). Incentive effects are comparable to effects of other variables, particularly "cognitive capital" and task "production" demands, and interact with those variables, so a narrow-minded focus on incentives alone is misguided. We also note that no replicated study has made rationality violations disappear purely by raising incentives.
Copyright 1999 by Kluwer Academic Publishers
According to the advocates of a "Generalized Darwinism" (GD), the three core Darwinian principles of variation, selection and retention (or inheritance) can be used as a general framework for the development of theories explaining evolutionary processes in the socioeconomic domain. Even though these are originally biological terms, GD argues that they can be re-defined in such a way as to abstract from biological particulars. We argue that this approach does not only risk to misguide positive theory development, but that it may also impede the construction of a coherent evolutionary approach to "policy implications". This is shown with respect to the positive, instrumental and normative theories such an approach is supposed to be based upon.
The authors present a model suggesting that innovative output is influenced by R&D and market struc ture characteristics. Using a new and direct measure of innovation in a cross-section regression model estimating the total number of inno vations and large- and small-firm innovations, they find that: (1) th e total number of innovations is negatively related to concentration and unionization, and positively related to R&D, skilled labor, and t he degree to which large firms comprise the industry; and (2) these d eterminants have disparate effects on large and small firms. Copyright 1988 by American Economic Association.
This paper focuses on developing and adapting statistical models of counts (non-negative integers) in the context of panel data and using them to analyze the relationship between patents and R&D expenditures. The model used is an application and generalization of the Poisson distribution to allow for independent variables; persistent individual (fixed or random) effects, and "noise" or randomness in the Poisson probability function. We apply our models to a data set previously analyzed by Pakes and Griliches using observations on 128 firms for seven years, 1968-74. Our statistical results indicate clearly that to rationalize the data, we need both a disturbance in the conditional within dimension and a different one, with a different variance, in the marginal (between) dimension. Adding firm specific variables, log book value and a scientific industry dummy, removes most of the positive correlation between the individual firm propensity to patent and its R&D intensity. The other new finding is that there is an interactive negative trend in the patents - R&D relationship, that is, firms are getting less patents from their more recent R&D investments, implying a decline in the "effectiveness" or productivity of R&D.
The U.S. Patent Office has recently computerized its data base. Thus an easily accessible rather direct indicator of the inventive output of firms is now available. We examine the sense in which the patent measure is a ‘good’ indicator of inventive activity by relating it to the R&D expenditures of a cross-section of 121 firms over an 8 year period.
The results of this study support the hypothesis that research activity is not a homogeneous activity, and that important differences exist between the determinants of process patenting and product patenting. Further, the effects on concentration and advertising of research depend on the type of research carried on by firms. Concentration and process patenting are positively related and concentration and product patenting are not. There is some weak evidence linking advertising and product patenting. Further, process patenting tends to generate greater industrial concentration.
We study a two-person zero-sum game where players simultaneously choose sequences of actions, and the overall payoff is the average of a one-shot payoff over the joint sequence. We consider the maxmin value of the game played in pure strategies by boundedly rational players and model bounded rationality by introducing complexity limitations. First we define the complexity of a sequence by its smallest period (a nonperiodic sequence being of infinite complexity) and study the maxmin of the game where player 1 is restricted to strategies with complexity at most n and player 2 is restricted to strategies with complexity at most m. We study the asymptotics of this value and a complete characterization in the matching pennies case. We extend the analysis of matching pennies to strategies with bounded recall.
The causal effect of labor unions on innovation
- D J Bradley
- I Kim
- X Tian
Bradley, D. J., Kim, I., & Tian, X. (2016). The causal effect of labor unions on innovation. Management Science, forthcoming.
Happiness and productivity Discussion paper 4645
- A J Oswald
- E Proto
- D Sgroi
Oswald, A. J., Proto, E., & Sgroi, D. (2009). Happiness and productivity Discussion paper 4645. Bonn, Germany: Institute for the Study of Labor (IZA).
The financing of R&D and innovation. Handbook of the Economics of Innovation
- B H Hall
- J Lerner
Hall, B. H., & Lerner, J. (2010). The financing of R&D and innovation. Handbook of the Economics of Innovation, 1, 609-639.