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Reaching for the Stars: Who Pays for Talent in Innovative Industries?

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Author Info
Fredrik Andersson
Matthew Freedman
John Haltiwanger
Julia Lane
Kathryn Shaw

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Abstract

Innovative firms need to hire and motivate highly talented workers. This article connects the potential returns to innovation to the structure of compensation for skilled employees. We show that the software firms that operate in software sectors with high potential upside gains to innovation pay more to 'star' workers than do other firms that operate in stable markets. Firms operating in product domains with highly skewed positive returns pay employees more in up-front starting salaries and offer higher compensation growth. The large estimated effects on earnings are robust to the inclusion of a wide range of controls for worker and firm characteristics. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2009.02277.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 119 (2009)
Issue (Month): 538 (06)
Pages: F308-F332
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Handle: RePEc:ecj:econjl:v:119:y:2009:i:538:p:f308-f332

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," NBER Working Papers 12365, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Leonard I. Nakamura, 2008. "Intangible assets and national income accounting," Working Papers 08-23, Federal Reserve Bank of Philadelphia. [Downloadable!]
  3. N. Lacetera & L. Zirulia, 2008. "Knowledge Spillovers, Competition, and R&D Incentive Contracts," Working Papers 624, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  4. Jonathan L. Willis & Julie Wroblewski, 2007. "What happened to the gains from strong productivity growth?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-23. [Downloadable!]
  5. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," NBER Working Papers 13653, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. B. Atrostic, 2008. "Measuring U.S. innovative activity: business data at the U.S. Census Bureau," The Journal of Technology Transfer, Springer, vol. 33(2), pages 153-171, April. [Downloadable!] (restricted)
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This page was last updated on 2009-11-12.

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