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Who Has a Better Idea? Innovation, Shared Capitalism, and HR Policies

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  • Erika Harden
  • Douglas L. Kruse
  • Joseph R. Blasi
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    Abstract

    We investigate the relationship of "shared capitalist" compensation systems - profit/gainsharing, employee ownership, and stock options - to the culture for innovation and employees' ability and willingness to engage in innovative activity. Using a large dataset with over 25,000 employee surveys in over 200 worksites of a large multinational organization, we find that both shared capitalism compensation and high performance work policies contribute to these innovation outcomes. Owning company stock is the most consistently positive compensation variable in predicting both an innovation culture and willingness to engage in innovative activity. We also find that shared capitalism and high performance work policies have stronger effects in predicting an innovation culture when they are combined, and that the effects of shared capitalism and high performance work policies are partially, but not wholly, mediated through greater employee alignment with company strategy. The findings are consistent with agency theories predicting that the principal agent problem can be addressed by a combination of shared incentives and cooperative culture which encourages mutual monitoring and opportunities to share information.

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    File URL: http://www.nber.org/papers/w14234.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14234.

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    Date of creation: Aug 2008
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    Handle: RePEc:nbr:nberwo:14234

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    1. Josh Lerner & Julie Wulf, 2006. "Innovation and Incentives: Evidence from Corporate R&D," NBER Working Papers 11944, National Bureau of Economic Research, Inc.
    2. Nick Bontis, 2002. "Managing An Organizational Learning System By Aligning Stocks and Flows," Journal of Management Studies, Wiley Blackwell, vol. 39(4), pages 437-469, 06.
    3. John MacDuffie, 1995. "Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
    4. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Douglas Kruse & Joseph Blasi & Robert Buchele & Adria Scharf & Loren Rodgers & Chris Mackin & Richard B. Freeman, 2004. "Motivating employee owners in ESOP firms: human resource policies and company performance," LSE Research Online Documents on Economics 19930, London School of Economics and Political Science, LSE Library.
    6. Andrew H. Van de Ven, 1986. "Central Problems in the Management of Innovation," Management Science, INFORMS, vol. 32(5), pages 590-607, May.
    7. Henderson, Rebecca. & Cockburn, Iain., 1994. "Measuring competence? : exploring firm effects in pharmaceutical research," Working papers 3712-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Cited by:
    1. C Green & J S Heywood, 2008. "Profit Sharing and the Quality of Relations with the Boss," Working Papers 596078, Lancaster University Management School, Economics Department.
    2. Robert Buchele & Douglas Kruse & Loren Rodgers & Adria Scharf, 2009. "Show Me the Money: Does Shared Capitalism Share the Wealth?," NBER Working Papers 14830, National Bureau of Economic Research, Inc.

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