When the principal knows better than the agent: Subjective evaluations as an optimal disclosure mechanism

When the firm has some private and unverifiable information about an employee’s ability, it can design a subjective evaluation mechanism, whereby payments are tied to evaluations, to communicate such information. In this paper, I investigate how to design an optimal disclosure mechanism for the firm. I characterize the firm’s optimal disclosure policy as a function of the worker’s ability distribution, with the hazard rate function playing a key role. I also demonstrate that with some reasonable restrictions on the ability distribution, the firm’s optimal strategy exhibits a particular pattern: it will reward the best workers aggressively, fire the worst ones, and assign one central rating to the rest. The predictions are consistent with the way firms utilize subjective evaluations in reality.     

An empirical assessment of assortative matching in the labor market

In labor markets with worker and firm heterogeneity, the matching between firms and workers may be assortative, meaning that the most productive workers and firms team up. We investigate this with longitudinal population-wide matched employer–employee data from Portugal. Using panel data methods, we quantify a firm-specific productivity term for each firm, and we relate this to the skill distribution of workers in the firm. We find that there is positive assortative matching, in particular among long-lived firms. Using skill-specific estimates of an index of search frictions, we find that the results can only to a small extent be explained by heterogeneity of search frictions across worker skill groups.     

Relational capital,environmental knowledge integration,and environmental performance of small and medium enterprises in emerging markets

Although several prior studies have examined associations between firm social capital and environmental sustainability, the links between relational resources (i.e., relational capital and ties strength), environmental knowledge integration, and environmental performance have yet to be well established at the micro-level. This study, therefore, aims to determine (1) how environmental knowledge integration serves as a mediating mechanism for the relationship between relational capital and environmental performance and (2) how this impact differs at different levels of ties strength. A quantitative approach has been adopted to examine the main hypotheses using a structural equation model (SEM) technique. Two groups of actors were surveyed, including chief executive officers (CEOs) and financial officers of small and medium-sized enterprises (SMEs) operating in Dubai, United Arab Emirates. In total, 216 survey responses were gathered, suggesting a response rate of 73.22%. Our findings suggest that environmental knowledge integration is a vital mediating mechanism for the relationship between relational capital and SMEs' environmental performance. Also, we find that ties strength moderates the indirect effect of relational capital on SMEs' environmental performance via environmental knowledge integration. Our empirical evidence provides recommendations for SMEs' managers and policymakers to promote environmental sustainability in the emerging market context.     

Turnover and Knowledge Loss: An Examination of the Differential Impact of Production Manager and Worker Turnover in Service and Manufacturing Firms

This research examines the comparative effects of production manager and worker turnover in service and manufacturing settings. We suggest that, due to the centrality of human action in services and the ability of manufacturers to insulate the technical core, service and manufacturing companies are differentially dependent on and impacted by the loss of production manager and worker knowledge. The results from a survey of 150 service and manufacturing firms provide partial support for this notion and show that turnover impacts these organizations differently. More specifically, we find that: (1) the negative impact of production worker turnover on firm performance is greater in service settings than in manufacturing settings; and (2) the negative impact of production worker turnover on firm performance is greater than the impact of production manager turnover in service firms. In addition, our findings show that organizational capital moderates the turnover–performance relationship for production workers in service firms.     

The processes of social capital and employee creativity: empirical evidence from intraorganizational networks

The aim of this paper is to extend and elaborate social capital approaches to organizational creativity by identifying different mechanisms that employees can deploy to promote the development of social capital through social interaction, relationship quality and network ties. The findings, based on data from a sample of 382 employees across different areas of expertise and countries in a multinational manufacturing firm, indicate that relationship quality and network ties play a mediating role between social interaction and organizational creativity. The findings of this study contribute to the development of a conceptual theoretical model for explaining the interrelationships among three mechanisms of social capital and organizational creativity performance.     

Working hours in Chinese enterprises: evidence from matched employer–employee data

The purpose of this article is to explore the factors that are correlated with hours worked in China. A distinguishing feature of the study is that we used representative‐matched employer and employee data. Hence, in addition to the usual worker characteristics examined in conventional economic models of labour supply, we also took into account the influence of firm characteristics and policies on the number of hours worked. The results suggested that in addition to the hourly wage rate, labour supply characteristics and human capital characteristics of the individual, firm‐level differences are important in explaining variation in weekly hours worked in Chinese firms. In particular, our results suggested that there is a norm of longer working hours in firms that employ a high proportion of female and migrant workers, that hours worked are less in firms which pay overtime and that hours worked are less in firms in which labour disputes have disrupted production. The policy implications of Chinese firms reducing hours worked were discussed.     

The effects of psychological capital and risk tolerance on service workers’ internal motivation for firm performance and entrepreneurship

This study investigates how psychological capital and risk tolerance can inspire service workers to develop internal motivation and entrepreneurial confidence. Data were gathered from a survey of 255 service workers in the metropolitan area of Seoul, South Korea. The results showed that service workers’ psychological capital consisted of two main constructs: hopeful self-efficacy and optimistic resilience. The results indicated that hopeful self-efficacy had no significant effect on service workers’ internal motivation, while the optimistic resilience had a positive effect which in turn positively impacted entrepreneurial confidence. On the other hand, risk tolerance was found not to affect service workers’ internal motivation. These results imply that optimistic service workers, with recuperative powers, tended to be proactive in their work and have more confidence when establishing new ventures. They also suggest that service firms can improve organizational performance by promoting worker optimism and resilience. This study provides practical insights into why service firms should pay attention to worker optimism and resilience to improve firm performance over the long run, not only for the firms but for the national economy as a whole.     

Optimal promotions of competing firms in a frictional labour market with organizational hierarchies

We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labour market. Workers acquire experience over time while being employed in a junior position and the firm has to determine the experience level at which the worker receives a promotion which allows her to fill a senior position. Promoted workers move to the senior position in their current firm, if it is vacant, otherwise they search for senior positions on the market. The promotion cut-offs of the competing firms exhibit strategic complementarity, but we show that generically a unique stable symmetric general equilibrium exists. We find that stronger competition among firms leads to later (earlier) promotions if the initial number of firms is small (large) giving rise to an inverse U-shape relationship. In the presence of two skill groups, stronger competition among firms reduces the importance of skill differences, so the gap in wages and promotion times decreases with the number of firms. The model is compatible with empirical evidence that high-skill workers are promoted faster than the low-skilled and that internal promotions are more frequent than cross-firm moves to a higher hierarchical position.     

Social capital and innovation in family firms: The moderating roles of family control and generational involvement

Drawing on the social capital literature, we examine whether the co-existence of distinct yet interacting social groups, namely family and non-family members, creates the conditions for increased family firm innovation. In particular, we theorize that family and non-family social capital have a joint positive effect on family firm innovation and this joint effect is stronger than the single effects of family and non-family social capital. In addition, we predict that while family control has a positive moderating effect, generational involvement has a negative moderating effect on the above-mentioned relationship. With supportive empirical results, our research makes important contributions to the existing literature.     

Use of employees and alternative work arrangements in the United States: a law,economics, and organizations perspective

This paper considers the incidence of employees versus other forms of work in the United States, including temporary agency workers, contract company workers, independent contractors, and self-employment. It does so within a single, unifying framework. The approach takes an economics of organizations focus to consider when it is optimal for the firm to control the work routine instead of the worker. This is critical in defining and determining employment versus other forms of work. The cost of measuring output and monitoring effort and of worker versus firm expertise are important in determining the organization of work. This approach proves fruitful, but it also is important to account for the impact of certain legal restrictions in the U.S. labor market. The empirical findings show that independent contractors are in jobs that require worker expertise and training and for which monitoring of worker effort is difficult. Contract company workers' characteristics are a hybrid between independent contractors' and employees'. Temporary agency workers occur where the firm wishes to legally outsource its low-wage workers yet still maintain a degree of control over their work routine.     

There's No Place Like Home

A bstract .   Employment stability for many nonstandard workers is tenuous and early research shows some types of nonstandard employment carry long-term consequences in the form of lower wages and fewer benefits over time. This paper seeks to add to the literature by considering another long-term consequence for nonstandard workers: the inability of some nonstandard workers to accumulate assets. The particular asset this paper focuses on is home ownership. Logistic regression results using data from the National Longitudinal Survey of Youth 1979 suggest that current and past employment in some nonstandard jobs, especially as a temporary worker, is associated with a lower probability of owning a home. This may have repercussions not only for households with temporary workers but for their community as well, since home ownership has been tied to positive spillovers such as increased social capital and community involvement.     

Social Capital and Social Influence on the Board of Directors

It is often assumed that directors with human capital such as prior management experience or independence from the company are the most influential board members. By contrast, in a survey of all the board members in 14 companies we found that ties to others in a network of strong ties among those who meet outside of board meetings were more important predictors of social influence than human capital or ties across boards. These ties within the board represent the social capital of members in the form of prior relationships with other directors, ties to others on the board, and membership in cliques within the board's network of ties. These results support a social capital perspective on influence that emphasizes relationships with others on the board as important factors in the social dynamics of board decision-making.     

Will We Ever Meet Again? The Relationship between Inter-Firm Managerial Migration and the Circulation of Client Ties

A large body of research shows that the migration of managers from one professional service firm to another weakens the old employer’s relationship with its clients, because migrating managers remove their relationship-specific knowledge and expertise – i.e., human and social capital – from their old employers, redeploying it to their new employers. This study extends this research by introducing a bi-directional perspective of social capital in which both firms and managers may exploit these relationship-specific resources. We use theory on social capital to build arguments about how one form of manager mobility, manager migration between two service providers in a single market, can both lead and lag the movement of client ties between those providers, and signaling theory to hypothesize the conditions under which this is likely to occur. Analyses using longitudinal data on New York City advertising agencies generally support our arguments. Our findings contribute to theory and research on manager migration, social capital, and signaling, and raise new questions for how the portability of relationship-specific social capital shapes markets.     

Antecedents of New Director Social Capital

Prior research shows that firms benefit from the social capital of their boards of directors but has not explored the antecedents of new director social capital. We argue that firms can attract directors with social capital by offering more compensation. We also argue that more complex firms (firms with a greater scale and scope of operations) are more attractive to such directors because of the greater experience and exposure that such directorships provide. Similarly, we argue that firms with high‐status directors on their current boards will be more attractive to directors with social capital. We analyse the social capital of new outside directors added to boards of semiconductor firms between 1993 and 2007. Surprisingly, we find no support for the hypothesis that higher compensation is associated with adding directors with high status or board ties. However, firm complexity is associated with the ability to add new directors who have social capital, and the status of current board members is associated with the ability to add new directors who also have high status.     

Great expectations: Past wages and unemployment durations

Decomposing wages into worker and firm wage components, we find that firm-fixed components are sizeable parts of workers' wages. If workers can only imperfectly observe the extent of firm-fixed components in their wages, they might be misled about the overall wage distribution. Such misperceptions may lead to unjustified high reservation wages, resulting in overly long unemployment durations. We examine the influence of previous wages on unemployment durations for workers after exogenous lay-offs and, using Austrian administrative data, we find that younger workers are, in fact, unemployed longer if they profited from high firm-fixed components in the past. We interpret our findings as evidence for overconfidence generated by imperfectly observed productivity.     

Networks and leadership development: Building linkages for capacity acquisition and capital accrual

Social networks can aid the leadership development process through facilitating access to important developmental assignments and the acquisition of capabilities to handle associated challenges. Although much of the traditional focus of leadership development has been on building intrapersonal capabilities, functioning effectively as a leader necessitates the development of interpersonal capabilities associated with dyadic ties and relational capabilities associated with patterns of ties within networks. Such capabilities allow aspiring managers to accrue not only human capital, but social and system capital as well. Aspiring managers can tap task, career, and friendship/support networks to aid developmental and career success. Structure factors, including strategic choices, network characteristics, and the technological interface moderate the ability of managers to convert potential network contacts into significant leadership development and capital accrual. Personal factors also influence leadership development prospects. Overall, there are many ways in which network concepts associated with dyadic and relational levels of analysis can facilitate addressing the challenges that are key to leadership development.     

Dimensions of Social Capital and Firm Competitiveness Improvement: The Mediating Role of Information Sharing

abstract    This study investigates the mediating role of information sharing in the relationships between dimensions of social capital and firm competitiveness, thereby positing a possible explanation for the divergent empirical results of the social capital–performance relationship in the existing literature. The study uses a sample of 108 Hong Kong-based Chinese family-owned firms from the manufacturing sector. Largely supporting the theoretical predictions, the results from multiple regression and structural equation model tests show that information sharing plays a mediating role in the relationships between three dimensions of social capital (trust, network ties, and repeated transactions) and firm competitiveness improvement.     

农民工的社会网络变迁

采用系统模式研究了进城农民工的社会网络重构过程,指出随着谋生方式由农业生产向非农产业的转移,进城农民工正在逐步建立起以业缘关系为基础的新的社会纽带,并使之成为其社会网络的重要组成部分.这些由进城农民工一手构建的社会关系网络正在成为他们在城市生活中赖以生存和发展的重要资本.     

Worker reciprocity and the returns to training: Evidence from a field experiment

Do reciprocal workers have higher returns to employer-sponsored training? Using a field experiment with random assignment to training combined with survey information on workers' reciprocal inclinations, the results show that reciprocal workers reciprocate employers' training investments by higher posttraining performance. This result, which is robust to controlling for observed personality traits and worker fixed effects, suggests that individuals reciprocate the firm's human capital investment with higher effort, in line with theoretical models on gift exchange in the workplace. This finding provides an alternative rationale to explain firm training investments even with the risk of poaching.     

Workplace democracy in the lab

While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial effects, empirical evidence of such effects is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real‐effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented, worker characteristics such as ability and gender, and possible sorting.