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

  • Erika Harden
  • Douglas L. Kruse
  • Joseph R. Blasi
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    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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    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
    Date of revision:
    Handle: RePEc:nbr:nberwo:14234
    Note: LS
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    1. 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.
    2. 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.
    3. 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.
    4. Josh Lerner & Julie Wulf, 2007. "Innovation and Incentives: Evidence from Corporate R&D," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 634-644, November.
    5. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Joseph Blasi & Robert Buchele & Richard Freeman & Douglas Kruse & Chris Mackin & Loren Rodgers & Adria Scharf, 2004. "Motivating Employee Owners in ESOP Firms: Human Resource Policies and Company Performance," CEP Discussion Papers dp0658, Centre for Economic Performance, LSE.
    7. Van de Ven, Andrew R., 1986. "Central Problems in the Management of Innovation," Agricultural Research Policy Seminar 139708, University of Minnesota Extension.
    8. Andrew H. Van de Ven, 1986. "Central Problems in the Management of Innovation," Management Science, INFORMS, vol. 32(5), pages 590-607, May.
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