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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

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.

Suggested Citation

  • Erika Harden & Douglas L. Kruse & Joseph R. Blasi, 2008. "Who Has a Better Idea? Innovation, Shared Capitalism, and HR Policies," NBER Working Papers 14234, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14234
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    References listed on IDEAS

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    1. Andrew H. Van de Ven, 1986. "Central Problems in the Management of Innovation," Management Science, INFORMS, vol. 32(5), pages 590-607, May.
    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, June.
    3. Douglas Kruse & Richard Freeman & Joseph Blasi & Robert Buchele & Adria Scharf & Loren Rodgers & Chris Mackin, 2003. "Motivating Employee-Owners in ESOP Firms: Human Resource Policies and Company Performance," NBER Working Papers 10177, National Bureau of Economic Research, Inc.
    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. Van de Ven, Andrew R., 1986. "Central Problems in the Management of Innovation," Agricultural Research Policy Seminar 139708, University of Minnesota Extension.
    6. 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.
    7. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Cited by:

    1. Green, Colin P. & Heywood, John S., 2010. "Profit sharing and the quality of relations with the boss," Labour Economics, Elsevier, vol. 17(5), pages 859-867, October.
    2. Robert Buchele & Douglas L. Kruse & Loren Rodgers & Adria Scharf, 2010. "Show Me the Money: Does Shared Capitalism Share the Wealth?," NBER Chapters,in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 351-375 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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