Work for it
Marcie LePine et al.
Academy of Management Journal, forthcoming
Abstract:
We develop and test a theoretical model that explores how individuals appraise different types of stressful job demands and how these cognitive appraisals impact job performance. The model also explores how charismatic leaders influence such appraisal and reaction processes, and by virtue of these effects, how leaders can influence the impact of stressful demands on their followers' job performance. In Study 1 (n = 74 U.S. Marines), our model was largely supported in hierarchical linear modeling analyses. Marines whose leaders were judged by superiors to exhibit charismatic leader behaviors appraised challenge stressors as being more challenging, and were more likely to respond to this appraisal with higher performance. Although charismatic leader behaviors did not influence how hindrance stressors were appraised, they negated the strong negative effect of hindrance appraisals on job performance. In Study 2 (n = 270 U.S. Marines) charismatic leader behaviors were measured through the eyes of the focal Marines, and the interactions found in Study 1 were replicated. Results from multilevel structural equation modeling analyses also indicate that charismatic leader behaviors moderate both the mediating role of challenge appraisals in transmitting the effect of challenge stressors to job performance, and the mediating role of hindrance appraisals in transmitting the effect of hindrance stressors to job performance. Implications of our results to theory and practice are discussed.
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Corporate Prediction Markets: Evidence from Google, Ford, and Firm X
Bo Cowgill & Eric Zitzewitz
Review of Economic Studies, forthcoming
Abstract:
Despite the popularity of prediction markets among economists, businesses and policymakers have been slow to adopt them in decision making. Most studies of prediction markets outside the lab are from public markets with large trading populations. Corporate prediction markets face additional issues, such as thinness, weak incentives, limited entry and the potential for traders with biases or ulterior motives – raising questions about how well these markets will perform. We examine data from prediction markets run by Google, Ford Motor Company and an anonymous basic materials conglomerate (Firm X). Despite theoretically adverse conditions, we find these markets are relatively efficient, and improve upon the forecasts of experts at all three firms by as much as a 25% reduction in mean squared error. The most notable inefficiency is an optimism bias in the markets at Google. The inefficiencies that do exist generally become smaller over time. More experienced traders and those with higher past performance trade against the identified inefficiencies, suggesting that the markets' efficiency improves because traders gain experience and less skilled traders exit the market.
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The Value of Hiring through Employee Referrals
Stephen Burks et al.
Quarterly Journal of Economics, forthcoming
Abstract:
Using personnel data from nine large firms in three industries (call-centers, trucking, and high-tech), we empirically assess the benefit to firms of hiring through employee referrals. Compared to non-referred applicants, referred applicants are more likely to be hired and more likely to accept offers, even though referrals and non-referrals have similar skill characteristics. Referred workers tend to have similar productivity compared to non-referred workers on most measures, but referred workers have lower accident rates in trucking and produce more patents in high-tech. Referred workers are substantially less likely to quit and earn slightly higher wages than non-referred workers. In call-centers and trucking, the two industries for which we can calculate worker-level profits, referred workers yield substantially higher profits per worker than non-referred workers. These profit differences are driven by lower turnover and lower recruiting costs for referrals.
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Are Winners Promoted Too Often? Evidence from the NFL Draft 1999–2012
Carl Kitchens
Economic Inquiry, April 2015, Pages 1317–1330
Abstract:
Firms engaging in hiring face recruitment costs. To reduce these costs, firms concentrate their efforts in locations that are perceived as talent rich or have produced successful employees in the past. Such recruitment mechanisms may lead to statistical discrimination if they reduce uncertainty for a subset of candidates or if firms relate current employee attributes with the institution. In this article, I test for statistical discrimination associated with an individual's institutional affiliation that results from targeted hiring practices by using a unique individual-level data set of National Football League (NFL) draft prospects. I find that conditional on individual ability, individuals from highly ranked college teams are drafted earlier than individuals from lower ranked institutions. Over the length of a player's professional career, a player's college institution has no effect on career success, indicating that certain players are damaged by this recruitment mechanism. Even though players can suffer substantial financial damages as a result of being drafted later in the draft, NFL team performance is not sufficiently affected for teams to exploit this bias.
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Spencer Harrison & David Wagner
Academy of Management Journal, forthcoming
Abstract:
Most research on creativity describes it as a net positive: producing new products for the organization and satisfaction and positive affect for creative workers. However, a host of anecdotal and historical evidence suggests that creative work can have deleterious consequences for relationships. This raises the question: how does creativity at work impact relationships at home? Relying on work-family conflict and resource allocation theory as conceptual frameworks, we test a model of creative behaviors during the day at work and the extent to which employees spend time with their spouses at home in the evening, using 685 daily matched responses from 108 worker-spouse pairings. Our results reveal that variance-focused creative behaviors (problem identification, information searching, idea generation) lead to a decline in time spent with spouse at home. In contrast, selection-focused creative behaviors (idea validation) lead to an increase in time spent with spouse. Further, openness to experience moderates these relationships. Overall, the results raise questions about the possible relational costs of creative behaviors at work on life at home.
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Kevin Cahill et al.
Journal of Behavioral and Experimental Economics, June 2015, Pages 40–54
Abstract:
This paper examines the extent to which job satisfaction, employee engagement, and satisfaction with work-life balance are influenced by changes in the macroeconomy. Data on employee attitudes are obtained from the Age and Generations dataset, a survey of more than 2,000 employees from nine large organizations that took place just prior to and immediately following the onset of the 2007-2009 recession. We find that the state of the macroeconomy impacts job satisfaction, employee engagement, and satisfaction with work-life balance, suggesting that employees’ job- and family-related attitudes are influenced by factors beyond the immediate job and family domains.
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Job Assignment with Multivariate Skills and the Peter Principle
Stefanie Brilon
Labour Economics, January 2015, Pages 112–121
Abstract:
This paper analyzes the job assignment problem faced by a firm when workers’ skills are distributed along several dimensions and jobs require different skills to varying extent. I derive optimal assignment rules with and without slot constraints, and show that under certain circumstances workers may get promoted although they are expected to be less productive in their new job than in their old job. This can be interpreted as a version of the Peter Principle which states that workers get promoted up to their level of incompetence.
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Bad News: An Experimental Study on the Informational Effects Of Rewards
Andrei Bremzen et al.
Review of Economics and Statistics, March 2015, Pages 55-70
Abstract:
Psychologists and economists have argued that rewards often have hidden costs. One possible reason is that the principal may have incentives to offer higher rewards when she knows the task is difficult. Our experiment tests if high rewards embody such bad news and if this is correctly perceived by their recipients. Our design allows us to decompose the overall effect of rewards on effort into a direct incentive and an informational effect. The results show that participants correctly interpret high rewards as bad news. In accordance with theory, the negative informational effect coexists with the direct positive effect.
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Hidden benefits of reward: A field experiment on motivation and monetary incentives
Ola Kvaløy, Petra Nieken & Anja Schöttner
European Economic Review, May 2015, Pages 188–199
Abstract:
We conducted a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk improves performance only when accompanied by performance pay. Moreover, performance pay reduces performance unless it is accompanied by motivational talk. These effects also carry over to the quality of work. Performance pay alone leads to more mistakes. Adding motivational talk makes the difference. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent.
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Isaac Smith, Maryam Kouchaki & Justin Wareham
Cornell University Working Paper, March 2015
Abstract:
Does receiving requests to engage in morally questionable behavior at work decrease one’s job performance? We draw on moral psychology and a psychological theory of meaning-making to explain the negative performance consequences of being the recipient of unethical requests. Specifically, participants of a laboratory experiment who received an unethical request from an experimenter performed worse on a cognitive task than those in a neutral-request condition (Study 1). Moreover, paired survey responses from a sample of U.S. working adults and their supervisors showed negative relationships between receiving unethical requests at work and both job performance and citizenship behaviors directed at the organization. These effects were mediated by a decrease in intrinsic job motivation, and moderated by moral disengagement (Study 2). Taken together, our studies suggest that receiving unethical requests can fundamentally change the meaning of one’s work and have negative performance consequences.
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Madeleine Daepp et al.
Journal of the Royal Society Interface, May 2015
Abstract:
The firm is a fundamental economic unit of contemporary human societies. Studies on the general quantitative and statistical character of firms have produced mixed results regarding their lifespans and mortality. We examine a comprehensive database of more than 25 000 publicly traded North American companies, from 1950 to 2009, to derive the statistics of firm lifespans. Based on detailed survival analysis, we show that the mortality of publicly traded companies manifests an approximately constant hazard rate over long periods of observation. This regularity indicates that mortality rates are independent of a company's age. We show that the typical half-life of a publicly traded company is about a decade, regardless of business sector. Our results shed new light on the dynamics of births and deaths of publicly traded companies and identify some of the necessary ingredients of a general theory of firms.
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Joseph Raffiee & Russell Coff
Academy of Management Journal, forthcoming
Abstract:
Drawing on human capital theory, strategy scholars have emphasized firm-specific human capital as a source of sustained competitive advantage. In this study, we begin to unpack the micro-foundations of firm-specific human capital by theoretically and empirically exploring when employees perceive their skills to be firm-specific. We first develop theoretical arguments and hypotheses based on the extant strategy literature, which implicitly assumes information efficiency and unbiased perceptions of firm-specificity. We then relax these assumptions and develop alternative hypotheses rooted in the cognitive psychology literature, which highlights biases in human judgment. We test our hypotheses using two data sources from Korea and the United States. Surprisingly, our results support the hypotheses based on cognitive bias - a stark contrast to the expectations embedded within the strategy literature. Specifically, we find organizational commitment and, to some extent, tenure are negatively related to employee perceptions of the firm-specificity. We also find that employer provided on-the-job training was unrelated to perceived firm-specificity. These findings suggest that firm-specific human capital, as perceived by employees, may drive behavior in ways not anticipated by existing theory - for example, with respect to investments in skills or turnover decisions. This, in turn, may challenge the assumed relationship between firm-specific human capital and sustained competitive advantage. More broadly, our findings may suggest a need to reconsider other theories, such as transaction cost economics, that draw heavily on the notion of firm-specificity and implicitly assume widely shared and unbiased perceptions.
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Charles Eesley & Lynn Wu
Stanford Working Paper, February 2015
Abstract:
We examine the performance of early-stage entrepreneurs before and after randomly showing them different approaches to finding an advisory social network tie, and we find important interactions between the type of social tie and the entrepreneur’s strategic process. To our knowledge, this is the first randomized, controlled field trial of both social networks and strategic process in the literature. In particular, the results show that adding a diverse network tie alone is less effective than combining a diverse tie with a specific strategic approach. In isolation, a planning strategic process is more effective than just adding a diverse mentor tie. Contrary to the finding that entrepreneurs often change their business model and strategic direction frequently, we find that instructing entrepreneurs to have a strong, persistent vision for their startup often results in better performance in the early stages. In contrast to prior work that shows that entrepreneurs often begin their ventures with a cohesive, closed network high in trust then transition later to a more diverse network, we find that early stage ventures appear to be better off with more diverse social ties in the beginning, particularly if a more adaptive approach is adopted for the venture’s strategy. The results suggest that social networks should not be altered for entrepreneurs and managers (as many recent policies attempt to do) without also taking the strategy formulation process into consideration.
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Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough
Brice Corgnet, Joaquín Gómez-Miñambres & Roberto Hernán-González
Management Science, forthcoming
Abstract:
The aim of this paper is to test the effectiveness of wage-irrelevant goal-setting policies in a laboratory environment. In our design, managers can assign a goal to their workers by setting a certain level of performance on the work task. We establish our theoretical conjectures by developing a model in which assigned goals act as reference points to workers’ intrinsic motivation. Consistent with our model, we find that managers set goals that are challenging but attainable for a worker of average ability. Workers respond to these goals by increasing effort and performance and by decreasing on-the-job leisure activities with respect to the no-goal-setting baseline. Finally, we study the interaction between goal setting and monetary rewards and find, in line with our theoretical model, that goal setting is most effective when monetary incentives are strong. These results suggest that goal setting may produce intrinsic motivation and increase workers’ performance beyond what is achieved by using solely monetary incentives.
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The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets
Geoffrey Tate & Liu Yang
Review of Financial Studies, forthcoming
Abstract:
We document differences in human-capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses compared with workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.
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Going Public: How Stock Market Listing Changes Firm Innovation Behavior
Simone Wies & Christine Moorman
Journal of Marketing Research, forthcoming
Abstract:
While going public allows firms access to more financial capital that can fuel innovation, it also exposes firms to a set of myopic incentives and disclosure requirements that constrain innovation. This tension is expected to produce a unique pattern of innovation strategies among firms going public with firms increasing their innovation levels but reducing their innovation riskiness. Specifically, the authors predict that after going public, firms innovate at higher levels and introduce higher levels of variety with each innovation while also introducing less risky innovation, characterized by fewer breakthrough innovations and fewer innovations into new-to-the-firm categories. Examining 40,000 product introductions from 1980–2011 in a sample of consumer packaged goods' firms that go public compared to a benchmark sample of firms that remain private, results support these predictions. Utilizing tests to resolve questions about endogeneity, including self-selection, reverse causality, and competing explanations, the authors demonstrate that IPO selection and IPO dynamics are not driving this going-public effect. The authors also uncover a set of industry factors that mitigate the drop in breakthrough innovation by offering product-market incentives that counterbalance the documented effect of stock market incentives.