Taking a hit to save the world? Employee participation in a corporate social initiative

Research Summary: Companies often justify their corporate social initiatives by citing talent management benefits. We examine the extent of, and the reasons for, employee interest in such an initiative in a global management consulting firm. We find a large fraction of employees to be interested in participation in the initiative even when participation requires a personal sacrifice in the form of a salary cut. However, this interest is driven not just by prosocial motivation: Expectations regarding private benefits, such as improved career prospects from new skills acquired, also play a role. Considerations of social impact and private benefits are equally salient when no salary cut is required, but private considerations become more prominent when participating employees are asked to accept a salary cut. Managerial Summary: Many companies are moving from stand‐alone corporate social responsibility (CSR) projects to social initiatives integrated into strategy. Providing employees with the opportunity to participate in such initiatives is said to help attract, motivate and retain talent. In this study, carried out in collaboration with a management consulting firm, we examine how much and why employees value participation in a corporate social initiative. Based on interviews and survey data, we find that employees are not only interested in, but often even willing to accept, a temporary salary cut for the opportunity. However, altruistic motivation is not the only driver of this interest: Employees also expect and value the possibility that the experience would lead to private benefits, such as developing skills likely to enhance their career prospects.     

Red,blue, and purple firms: Organizational political ideology and corporate social responsibility

Research summary : Why do firms vary so much in their stances toward corporate social responsibility (CSR )? Prior research has emphasized the role of external pressures, as well as CEO preferences, while little attention has been paid to the possibility that CSR may also stem from prevailing beliefs among the body politic of the firm. We introduce the concept of organizational political ideology to explain how political beliefs of organizational members shape corporate advances in CSR . Using a novel measure based on the political contributions by employees of Fortune 500 firms, we find that ideology predicts advances in CSR . This effect appears stronger when CSR is rare in the firm's industry, when firms are high in human capital intensity, and when the CEO has had long organizational tenure . Managerial summary : Why do firms vary in their stances toward corporate social responsibility (CSR )? Prior research suggests that companies engage in CSR when under pressure to do so, or when their CEOs have liberal values. We introduce the concept of organizational political ideology, and argue that CSR may also result from the values of the larger employee population. Introducing a novel measure of organizational political ideology, based on employees' donations to the two major political parties in the United States, we find that liberal‐leaning companies engage in more CSR than conservative‐leaning companies, and even more so when other firms in the industry have weaker CSR records, when the company relies heavily on human resources and when the company's CEO has a long organizational tenure . Copyright © 2016 John Wiley & Sons, Ltd.     

Competing for government procurement contracts: The role of corporate social responsibility

Research Summary: This study examines whether corporate social responsibility (CSR) improves firms’ competitiveness in the market for government procurement contracts. To obtain exogenous variation in firms’ social engagement, I exploit a quasi‐natural experiment provided by the enactment of state‐level constituency statutes, which allow directors to consider stakeholders’ interests when making business decisions. Using constituency statutes as instrumental variable (IV) for CSR, I find that companies with higher CSR receive more procurement contracts. The effect is stronger for more complex contracts and in the early years of the government‐company relationship, suggesting that CSR helps mitigate information asymmetries by signaling trustworthiness. Moreover, the effect is stronger in competitive industries, indicating that CSR can serve as a differentiation strategy to compete against other bidders. Managerial Summary: This study examines how companies can strategically improve their competitiveness in the market for government procurement contracts—a market of economic importance (15–20% of GDP). It shows that companies with higher social and environmental performance (CSR) receive more procurement contracts. This effect is stronger for more complex contracts, in the early years of the government–company relationship, and in more competitive industries. These findings indicate that firms’ CSR can serve as a signaling and differentiation strategy that influences the purchasing decision of government agencies. Accordingly, managers operating in the business‐to‐government (B2G) sector could benefit from integrating social and environmental considerations into their strategic decision making.     

Does product market competition foster corporate social responsibility? Evidence from trade liberalization

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi‐natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference‐in‐differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of “CSR as a competitive strategy” that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes CSR practices. Copyright © 2014 John Wiley & Sons, Ltd.     

Which boundaries? How mobility networks across countries and status groups affect the creative performance of organizations

Research summary : Losing key employees to competitors allows an organization to engage in external boundary‐spanning activities. It may benefit the organization through access to external knowledge, but may also increase the risks of leaking knowledge to competitors. We propose that the destination of departed employees is a crucial contingency: benefits or risks only materialize when employees leave for competitors that differ from the focal organization along significant dimensions, such as country or status group. In the context of the global fashion industry, we find that key employees' moves to foreign competitors may increase (albeit at a diminishing rate) their former employers' creative performance. Furthermore, firms may suffer from losing key employees to higher‐ or same‐status competitors, but may benefit from losing them to lower‐status competitors. Managerial summary : Losing key employees to competitors can provide organizations with access to external knowledge, but increase risks of leaking knowledge to competitors. We find that an organization's access to external knowledge and its risks of knowledge leakage through employee mobility may be affected by whether its employees leave for competitors in a foreign country or in a different status group. In the context of the global fashion industry, we show that key employees' moves to foreign competitors increase (up to a point) their former employers' creative performance. Furthermore, firms may suffer from losing key employees to higher‐ or same‐status competitors, but benefit from losing them to lower‐status competitors. Hence, executives in creative industries and possibly beyond could welcome losing employees to competitors in foreign countries or to lower‐status competitors. Copyright © 2016 John Wiley & Sons, Ltd.     

Does engagement in corporate social responsibility provide strategic insurance‐like effects?

Research summary : This study examines whether the stock and bond prices of firms engaging in corporate social responsibility (CSR) can benefit from insurance‐like effects during occurrences of negative events. Our results suggest that in the face of negative events, engagement in CSR on a continuous, long‐term basis provides insurance‐like effects on both the stock and bond prices of firms. Nevertheless, the effects are found to quickly disappear following the occurrence of a second, or subsequent, negative event. Although our results clearly indicate that firms need to allocate some of their available resources to long‐term strategic CSR activities, managers must also realize that in a crisis communication, they will probably be able to use their CSR claims on one occasion only. Managerial summary : The purpose of this article is to examine whether firms engaging in corporate social responsibility (CSR) can benefit from insurance‐like effects during occurrences of negative events. We find that on the occurrence of a negative event, long‐term CSR engagement does have insurance‐like effects. We also find that these insurance‐like effects may quickly disappear following the occurrence of a second negative event. Managers of firms with a long history of CSR activities need to realize that in a crisis communication, they can probably use their claims of adherence to CSR only once. Copyright © 2015 John Wiley & Sons, Ltd.     

Near and dear? The role of location in CSR engagement

Research summary : Building on economic geography and institutional theory, we develop and test theory relating geographic variables to the strength of corporate social responsibility (CSR) engagement and the cost of equity capital. For a large sample of U.S. firms over the period 1998–2009, we find strong and robust evidence that firms located in areas characterized by high levels of local CSR density score higher in CSR engagement. In addition, firms located close to major cities and financial centers exhibit higher CSR engagement compared to firms located in more remote areas. Moreover, the effect of CSR engagement on reducing equity financing costs is even greater for firms in high CSR density areas than for firms in low CSR density areas. Managerial summary : Does the location of CSR engagement by firms affect the strength of CSR engagement by their neighbors? Does the geography of engagement have an impact on financial performance? Our findings show that a firm's CSR engagement increases in areas where there is dense CSR engagement and when it is located near large cities. In these areas, norms, values, and knowledge related to CSR are transmitted to firms through face‐to‐face meetings and frequent social interactions with groups such as peers, labor unions, news media, universities, and community organizations, which tend to be concentrated in large cities. Our findings further highlight that CSR engagement reduces equity financing costs for firms in areas where CSR is widely practiced. Copyright © 2015 John Wiley & Sons, Ltd.     

Do Broad‐based Employee Ownership,Profit Sharing and Stock Options Help the Best Firms Do Even Better?

This article analyses the linkages among group incentive methods of compensation (broad‐based employee ownership, profit sharing and stock options), labour practices, worker assessments of workplace culture, turnover and firm performance in firms that applied to the ‘100 Best Companies to Work For in America’ competition from 2005 to 2007. Although employers with good labour practices self‐select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labour policies and outcomes, we find that employees in the firms that use group incentive pay more extensively participate more in decisions, have greater information sharing, trust supervisors more and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity.     

Who leaves,where to,and why worry? employee mobility,entrepreneurship and effects on source firm performance

We theorize that the value provided by the firm's complementary assets has important implications for the exit decisions of employees and their subsequent effects on the firm's performance. Using linked employee‐employer data from the U.S. Census Bureau on legal services, we find that employees with higher earnings are less likely to leave relative to employees with lower earnings, but if they do, are more likely to create a new venture than join another firm. Employee entrepreneurship has a larger adverse impact on source firm performance than moves to established firms, even controlling for observable employee quality. Our findings suggest that in knowledge intensive settings, managers should focus on tailoring compensation packages to help minimize the adverse impact of employee entrepreneurship, particularly among high performing individuals. Copyright © 2011 John Wiley & Sons, Ltd.     

Let them go? How losing employees to competitors can enhance firm status

Research summary : Because employees can provide a firm with human capital advantages over competitors, firms invest considerably in employee recruiting and retention. Departing from the retention imperative of strategic human capital management, we propose that certain employee departures can enhance a firm's competitiveness in the labor market. Specifically, increased rates of career‐advancing departures by a firm's employees can signal to potential future employees that the firm offers a prestigious employment experience that enhances external mobility opportunities. Characterizing advancement based on subsequent employers and positions, we analyze data on U.S. law firm hiring and industry surveys of perceived firm status between 2004 and 2013. We find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high‐status competitors. Managerial summary : Firms often emphasize employee retention. Employee departures, especially as a result of being hired away by competitors, are often viewed as threats to a firm's competitive advantage. We propose, however, that employee retention need not be an unconditional strategic imperative. We argue that certain employee departures can enhance a firm's competitiveness in the market for human capital by signaling to potential employees that the firm offers a prestigious employment experience, which can help them obtain attractive positions with other employers. Analyzing data on U.S. law firm hiring and industry surveys of firm associates between 2004 and 2013, we find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high‐status competitors. Copyright © 2016 John Wiley & Sons, Ltd.     

Monitoring what and how: psychological implications of electronic performance monitoring

Implementing electronic performance monitoring in the workplace might improve the efficiency and quality of employee data that are collected. These intended benefits might be discounted or even eliminated if employees have a negative reaction to the monitoring process. The goal of this exploratory study was therefore to investigate which electronic performance monitoring techniques and monitoring characteristics are associated with negative employee reactions using survey responses from 190 student workers. Results showed that close performance monitoring (via cameras, data entry, chat and phone recording) had significant negative effects on job attitudes such as job satisfaction and affective commitment. Similar effects were observed for employee self‐efficacy and perceived control. Attitudes were furthermore negatively impacted when the monitoring was focused on individuals and unpredictable, which also reduced organisational citizenship behaviour while continuous monitoring reduced self‐efficacy. These findings suggest that the benefits of close monitoring may be overshadowed by negative employee reactions.     

Employee Mobility and Interfirm Relationship Transfer: Evidence from the Mobility and Client Attachments of United States Federal Lobbyists, 1998–2014

Research summary : Employee mobility can erode competitive advantage by facilitating interfirm knowledge and relationship transfer. This study investigates the latter and identifies factors that influence the likelihood of its occurrence. Using a novel database that tracks the employment and client attachments of U.S. federal lobbyists, I show that repeated exchange with employees (firms) increases (decreases) the likelihood clients follow employees who switch firms. Structurally, multiplexity reduces the likelihood of client transfer and weakens the effect of employee–client repeated exchange, with the multiplexity effect strongest when team members have specialized expertise. By examining the main and interactive effects of repeated exchange, multiplexity, and specialized human capital, this study extends prior work by demonstrating how individual, organizational, and structural relationship characteristics affect client transfer and retention ex‐post employee mobility . Managerial summary : When do clients follow employees who switch firms? What can firms do to guard against it? These questions are important in service‐based industries where clients may become loyal to individual employees within the firm rather than to the firm itself. This study provides evidence that helps practicing managers: (a) identify which clients are most at risk of defecting if employees exit, and (b) structure relationships in ways that mitigate the likelihood that employee exit results in client loss. Findings suggest that a client is more likely to defect when she has extensive history working with the exiting employee, particularly if the employee was the sole link between the client and firm. Managers, however, can reduce the risk of client loss following employee exit by structuring relationships so that clients work with teams of employees rather than exclusively with an individual and by increasing the degree of specialization within these teams . Copyright © 2017 John Wiley & Sons, Ltd.     

Hybrid social media: employees’ use of a boundary‐spanning technology

Improved employee collaboration and communication can be facilitated by social technologies that extend within and beyond organisations. These social technologies have increasingly come to be represented by social media sites, which are used to extend workplace relationships across personal and professional boundaries in a hybrid role. This presents opportunities and risks as those boundaries are collapsed. Using boundary management as a theoretical lens, we evaluate the associations of relationship initiation between colleagues at different levels of organisations with employees’ strategies and their well‐being. We also investigate relationships with social media usage, age and propensity to self‐monitor and group employees using cluster analysis. We consider implications of our findings for developing more sophisticated policies, training and guidance for employees on the use of social media as a workplace tool.     

The Relationships of Informal High Performance Work Practices to Job Satisfaction and Workplace Profitability

Recent empirical evidence reveals considerable divergence between management reports and employee reports regarding organizational high performance work practices (HPWPs). This divergence implies that employees may not participate in some HPWPs that are formally present in their organizations, but also, that employees may participate in HPWPs that are not formally present in their organizations. In this study, we examine the implication of the latter case (i.e., employee participation in “informal” HPWPs) for employee‐level and organization‐level outcomes. Our analyses, using data from the Statistics Canada Workplace and Employee Survey, suggest that employee participation in informal HPWPs is associated with enhanced job satisfaction and workplace profitability in a similar way as employee participation in formal HPWPs is associated with these outcomes.     

Ownership and Pay in Britain

Drawing on principal–agent perspectives on corporate governance, the article examines whether employees’ hourly pay is related to ownership dispersion. Using linked employee‐workplace data from the British Workplace Employment Relations Survey 2011, and using a variety of techniques including interval regression and propensity score matching, average hourly pay is found to be higher in dispersed ownership workplaces. The premium is broadly constant across most of the wage distribution, but falls at the 95th percentile to become statistically non‐significant. This contrasts with earlier papers which indicate that higher level employees are the primary beneficiaries of higher pay from dispersed ownership. The dispersed ownership pay premium is not readily explained by efficiency wage perspectives but is consistent with a managerial desire for a ‘quiet life’.     

Employee mobility,spin‐outs,and knowledge spill‐in: How incumbent firms can learn from new ventures

Research summary: We consider conditions in which incumbent firms are particularly poised to benefit from knowledge spilling in from new ventures that employ individuals previously employed by the focal incumbent firm. We distinguish between inventors who leave their incumbent employers to found spin‐outs and those who become non‐founding employees of existing new ventures. Using a sample of new ventures and incumbent firms in the U.S. information technology (IT) sector, we find that incumbents are more likely to benefit from patented knowledge that spills in from their spin‐outs than from new ventures that employ non‐founding inventors formerly employed by the respective incumbent. Any advantage that parent firms have in reaping such knowledge quickly dissipates, however, when these parents have a history of misappropriating the intellectual property of others. Managerial summary: It has long been acknowledged that new ventures can acquire valuable knowledge from their larger and more established counterparts by hiring away their talented employees. We consider the possibility of a reverse flow of knowledge where established firms learn from those new ventures that have poached employees from them. We find that established information technology (IT) firms are more likely to learn and build on the technology of their spin‐outs (i.e., new ventures founded by their former inventors) than from new ventures that simply employ non‐founding inventors formerly employed by the respective IT firm. Any advantage that these IT firms had in reaping technical know‐how from their spin‐outs quickly dissipated, however, when they had a history of misappropriating the intellectual property of others. Copyright © 2016 John Wiley & Sons, Ltd.     

Firm‐specific knowledge resources and competitive advantage: the roles of economic‐ and relationship‐based employee governance mechanisms

The resource‐based view of the firm emphasizes the role of firm‐specific resources, especially firm‐specific knowledge resources, in helping a firm to achieve sustainable competitive advantage. However, the deployment of firm‐specific knowledge often requires key employees to make specialized human capital investments that are not easily redeployable to other settings. Thus, in the absence of effective safeguards and trust building devices, employees with foresight may be reluctant to make such specialized investments. This study explores both economic‐ and relationship‐based governance mechanisms that might mitigate this underinvestment problem. Effective use of these governance mechanisms enables a firm to obtain greater performance from its efforts to deploy firm‐specific knowledge resources. Empirical results further support these key arguments. Copyright © 2009 John Wiley & Sons, Ltd.     

The differential effects of CEO narcissism and hubris on corporate social responsibility

Research Summary: While prior studies have predominantly shown that CEO narcissism and hubris exhibit similar effects on various strategic decisions and outcomes, this study aims to explore the mechanisms underlying how narcissistic versus hubristic CEOs affect their firms differently. Specifically, we investigate how peer influence moderates the CEO narcissism/hubris—corporate social responsibility (CSR). With a sample of S&P 1500 firms for 2003–2010, we find that the positive relationship between CEO narcissism and CSR is strengthened (weakened) when board‐interlocked peer firms invest less (more) intensively in CSR than a CEO's own firm; the negative relationship between CEO hubris and CSR is strengthened when peer firms are engaged in less CSR than a CEO's own firm. Managerial Summary: Some CEOs are more narcissistic while others may be more hubristic, but these two groups of CEOs hold different attitudes toward the extent to which their firms should engage in corporate social responsibility (CSR). Our findings with a large sample of U.S. publically listed firms suggest that narcissistic CEOs care more about CSR, but hubristic CEOs care less. Interestingly, when narcissistic CEOs observe their peer firms engaging in more or less CSR than their own firms, they tend to respond in an opposite manner; in contrast, hubristic CEOs will only engage in even less CSR when their peers also do not emphasize CSR. Our findings point to a fundamental difference between CEO narcissism and hubris in terms of how they affect firms' CSR decisions based on their social comparison with peer firms.     

Corporate social responsibility and access to finance

We investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to (1) reduced agency costs due to enhanced stakeholder engagement and (2) reduced informational asymmetry due to increased transparency. Using a large cross‐section of firms, we find that firms with better CSR performance face significantly lower capital constraints. We provide evidence that both better stakeholder engagement and transparency around CSR performance are important in reducing capital constraints. The results are further confirmed using several alternative measures of capital constraints, a paired analysis based on a ratings shock to CSR performance, an instrumental variables approach, and a simultaneous equations approach. Finally, we show that the relation is driven by both the social and environmental dimension of CSR. Copyright © 2013 John Wiley & Sons, Ltd.     

The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis

Do shareholders gain when managers disperse corporate resources through activities classified as corporate social responsibility (CSR)? Strategy scholars have recently developed a theoretical model that links such activities to shareholder value when a firm suffers a negative event; we test key portions of this theory of the ‘insurance‐like’ property of CSR activity. We posit that such activity leads to positive attributions from stakeholders, who then temper their negative judgments and sanctions toward firms because of this goodwill. We extend the risk management model by theorizing that some types of CSR activities will be more likely to create goodwill and offer insurance‐like protection than other types. We delineate several firm and event specific characteristics that we expect to influence the link between CSR activities and an insurance effect. We then test our model using an event study of 178 negative legal/regulatory actions against firms throughout the 11 years from 1993–2003. We find that participation in institutional CSR activities—those aimed at a firm's secondary stakeholders or society at large—provides an ‘insurance‐like’ benefit, while participation in technical CSRs—those activities targeting a firm's trading partners—yields no such benefits. We conclude by considering the implications of our findings for future theorizing and research into the economic value of CSR engagement. Copyright © 2008 John Wiley & Sons, Ltd.