Relational retention

This paper uses a repeated-game model to study the retention of talented workers in the face of competition for talent. When the job benefits that workers value are non-contractible, retention cannot be achieved by a sequence of spot contracts, but must be based on self-enforcing long-term agreements, which we call relational retention contracts. Retention then is successful only if workers trust their employers' promises. We demonstrate that relational contracts are valuable even if there are no incentive problems inside firms and that firms with a relatively low valuation for talent may be able to retain talented workers.     

Vertical Foreclosure Using Exclusivity Clauses: Evidence from Shopping Malls

Exclusive contracts are one of the most controversial topics in the economic analysis of antitrust. Yet, very few empirical papers analyze the determinants and the consequences of exclusive contracts. In this paper, I study exclusive contracts between hamburger restaurants and Israeli shopping malls, in which mall owners commit to prohibiting additional hamburger restaurants from entering their malls. I investigate the determinants of these exclusive contracts and examine how such contracts affect the number of hamburger restaurants and their sales. I show that exclusive contracts are less likely to be adopted in larger malls, in malls that face more competition from other malls, and in malls that opened before 1993, when McDonald's and Burger King entered the Israeli market. I then use the mall's opening year—before or after 1993—as an instrumental variable to estimate a negative effect of exclusive contracts on the number of restaurants and on total mall hamburger sales. My findings are generally consistent with anti‐competitive vertical foreclosure models.     

On the Performance of Linear Contracts

We examine the ability of linear contracts to replicate the performance of optimal unrestricted contracts in the canonical moral hazard setting with a wealth constrained, risk averse agent. We find that in a broad class of environments, the principal can always secure with a linear contract at least 95% of the profit that she secures with an optimal unrestricted contract, provided the productivity of the agent's effort is not too meager.     

Labour market signalling and job turnover revisited

Turnover by both low and high productivity workers occurs in all jobs. However, the reasons for turnover by workers of different abilities differ. When the probability that better workers transmit accurate signals to the labour market increases, we show that incumbent employers are more likely to adopt a separating wage offer strategy. This reduces the likelihood of turnover by more productive workers. We also show that turnover depends on a firm's willingness to match outside wage offers. Hence, the personnel and wage policies adopted by employers are important for understanding the turnover of workers of all productivity types.     

Commentary on: “Talent—innate or acquired? Theoretical considerations and their implications for talent management”

This paper provides a commentary on the article in this special issue by Meyers, van Woerkom, and Dries (2013—this issue) on the meaning of the term ‘talent’ with a particular focus on the extent to which talent is an innate construct (nature), mostly acquired (nurture), or more based on an interaction of the two. While acknowledging Meyers et al.'s comprehensive and convincing overview of the differing perspectives on talent as innate versus acquired, we expand on their ideas in two important ways. Firstly, moving beyond debates on the exclusivity versus inclusivity of conceptualizations, we argue that the key focus for organizations should be on maximizing value creation through calibrating the level of talent required by the organization and ensuring that talents are deployed in those strategic jobs with the greatest potential for value creation. Secondly we touch on the translation of talent into performance in the organizational context by bring the import of context to the fore. We conclude with some directions for further study.     

Worker absenteeism and incentives: evidence from Italy

In Italy, employees are fully insured against earning losses due to illness. Since worker's health is not easily verifiable, absenteeism due to illness is considered an empirical proxy for employee shirking. The Bank of Italy Household Survey (SHIW) provides individual data on days of absence. Controlling for personal characteristics and potential determinants of health status and family responsibilities (age, gender, education, marital status, children at home), we show that the nature of employment contracts affects workers' incentives to provide effort: sickness absences, at least partially, hide opportunistic behaviours. The type of occupation and the labour contracts affects workers' behaviour in that more protected and difficult to monitor jobs show significantly higher levels of absenteeism: employees in public sector or in large firms, with permanent contracts or with longer tenure, individuals living in regions with low unemployment rates. Copyright © 2010 John Wiley & Sons, Ltd.     

The effects of age and family constraints on gender hiring discrimination: A field experiment in the French financial sector

Using correspondence testing, we investigate whether age and family constraints have an effect on the gender gap in access to job interviews. We sent job applications from three pairs of candidates to the same job advertisements in the French financial sector between January and March 2002, focusing on low-skilled administrative or commercial jobs and high-skilled administrative or commercial jobs. Within each pair, the applicants' characteristics were similar except for gender. We compare the gender gap in access to job interviews for single and childless applicants aged 25 and 37. We find significant hiring discrimination against women aged 25 applying for high-skilled administrative jobs. Young men are preferred to young women when employers offer long-term contracts. Among single and childless applicants aged 37, we find no significant hiring discrimination against women. We then compare the gender job-access gap for applicants aged 37 who are single and childless or married with three children. We do not find significant hiring discrimination against female applicants aged 37.     

Do Managers with Limited Liability Take More Risky Decisions? An Information Acquisition Model

Risk‐neutral individuals take more risky decisions when they have limited liability. Risk‐neutral managers may not when acting as agents under contract and taking costly actions to acquire information before taking decisions. Limited liability makes it optimal to increase the reward for outcomes relatively more likely to arise from desirable than from undesirable actions. The resulting decisions may be less, rather than more, risky. Making a decision after acquiring information provides an additional reason to those in the classic principal‐agent literature for using contracts with pay increasing in the return. Further results on the form of contracts are also derived.     

Subjective well-being among blue-collar immigrant employees: A systematic literature review

We present a systematic review of 67 empirical studies that examine the factors determining subjective well-being among blue-collar immigrant employees. Drawing on conservation of resources theory, we propose an integrated conceptual framework that organizes antecedents of blue-collar immigrants' subjective well-being based on resource loss and gain dynamics. Our findings indicate that resource loss was most likely when immigrants experienced precarious employment, physically and emotionally demanding jobs, injustice at work, poor living conditions, and migration-related stressors. Conversely, resource gain was most likely when they were supported by supervisors and colleagues at work, felt emotionally supported by friends, family, and community members, and adopted personal coping strategies to manage their stressors. We conclude by signaling opportunities for future research and recommendations for practitioners seeking to augment blue-collar immigrant employees' subjective well-being.     

HR managers’ talent philosophies: prevalence and relationships with perceived talent management practices

Abstract

HR managers have different beliefs about the nature, value, and instrumentality of talent—referred to as ‘talent philosophies’. In line with cognitive psychology, we reason that talent philosophies are similar to mental models that influence how HR managers interpret and use talent management (TM) practices within their organizations. In this article, we explore the prevalence of four different talent philosophies (exclusive/stable; exclusive/developable; inclusive/stable; inclusive/developable) in a sample of 321?HR managers. We then explore how talent philosophies relate to organizational context (i.e. size, ownership form, multinational orientation) as well as to HR managers’ perceptions of their organization’s TM practices. Cluster analysis corroborated the presence of the four talent philosophies in our dataset. All four talent philosophies were represented almost equally often in the overall dataset. Organizational size was found to be related to talent philosophies, such that HR managers who worked in smaller organizations were more likely to hold an inclusive talent philosophy. We also found support for the relationship between talent philosophies and perceptions of the exclusiveness or inclusiveness of the organization’s definition of talent, and its degree of workforce differentiation. Contrary to expectations, results did not support a link between talent philosophies and perceived talent identification criteria.     

Cognitive job crafting: A possible response to increasing job insecurity and declining professional prestige

Recent research has shown that job crafting, which describes individuals' attempts to craft a job to make it correspond more to personal inclinations, skills, and abilities, can generate significant work and nonwork benefits for individuals. Using the theoretical lens of activation theory, we examined whether professionals are prompted to cognitively craft their jobs in response to the increasing perception of precarisation of their profession, measured in terms of job insecurity and perceived external prestige. We adopted a mixed methods approach among professional accountants operating in Southern Italy and the results indicated the presence of two curvilinear relationships. More specifically, we found that accountants were more likely to engage in cognitive crafting when experiencing moderate levels of job insecurity (rather than high or low) and in the presence of both low and high levels of perceived external prestige (rather than a moderate level). Implications for theory and practice are discussed.     

Are Short‐lived Jobs Stepping Stones to Long‐Lasting Jobs?*

This article assesses whether short‐lived jobs (lasting one quarter or less and involuntarily ending in unemployment) are stepping stones to long‐lasting jobs (enduring 1 year or more) for Belgian long‐term unemployed school‐leavers. We proceed in two steps. First, we estimate labour market trajectories in a multi‐spell duration model that incorporates lagged duration and lagged occurrence dependence. Second, in a simulation we find that (fe)male school‐leavers accepting a short‐lived job are, within 2 years, 13.4 (9.5) percentage points more likely to find a long‐lasting job than in the counterfactual in which they reject short‐lived jobs.     

Subjective performance of patent examiners,implicit contracts,and self‐funded patent offices

Self‐funded patent offices should be concerned with patent quality (patents should be granted to only deserving innovations) and quantity (as revenues come from fees paid by applicants). In this context, we investigate what is the impact of the self‐funded constraint on different bonus contracts and how these contracts affect the examiners' incentive to prosecute patent applications. We consider contracts in which a patent office offers bonuses on quantity quotas (explicit contract) and on quality outcome (either an implicit contract or an explicit contract based on a quality proxy). We find that a self‐funded constrained agency should make different organization choices of incentives. For a low quality proxy precision, an agency facing a tight budget operates well with implicit contracts. However, by only relaxing moderately the budget constraint, the agency might be worse off simply because this will preclude implicit contracts. Only very large patenting fees might allow the agency to compensate for the loss of implicit contracts.     

Strategic trade policy with bargaining over managerial contracts

This paper re‐examines the well‐known activist regime's inefficiency (governments set export subsidies) in a sales–delegation game with owner–manager bargaining over contracts. Contrary to the received literature, this bargaining process may (a) induce governments to set a tax if products are not too substitute or complements and (b) lead to an efficient (inefficient) equilibrium provided that products are sufficiently differentiated (not too complements). Therefore, unilateral public intervention can be optimal: in case of rival governments' retaliation, under appropriate product competition degrees, welfares are larger than under free trade even for small managers' power. Thus, managerial delegation practices are crucial also for international trade issues.     

Talent — Innate or acquired? Theoretical considerations and their implications for talent management

In order to contribute to the theoretical understanding of talent management, this paper aims to shed light on the meaning of the term ‘talent’ by answering the following question: Is talent predominantly an innate construct, is it mostly acquired, or does it result from the interaction between (specific levels of) nature and nurture components? Literature stemming from different disciplines has been reviewed to summarize the main arguments in support of each of the three perspectives. Subsequently, these arguments are mapped on a continuum ranging from completely innate to completely acquired. We argue that an organization's position on this continuum entails important implications for its design of talent management practices, which we discuss extensively. By providing guidelines on how an organization's talent management system can be shaped in accordance with their respective talent definition, this paper is particularly useful to HR practitioners.     

The optimality of public–private partnerships under financial and fiscal constraints

The government may delegate two sequential tasks (e.g., building and operating an infrastructure) to the same or different agents (i.e., partnership vs. sequential contracts). Agents are risk-neutral but face financial constraints, whereas the government's contractual capacity may be limited by the renegotiation-proofness and fiscal constraints. By relying on history-dependent incentives, the partnership contract corrects moral hazard more effectively than sequential contracts. Thus, it is socially preferred unless bundling different tasks deteriorates the agent's financial conditions. Our results shed new light on the role of firms' financial and government's fiscal conditions in driving the cost–benefit analysis of public–private partnerships.     

Complexity of Outsourcing Contracts and Ex Post Transaction Costs: An Empirical Investigation*

abstract In this article, we use Transaction Cost Economics (TCE) and the Resource‐Based View (RBV) of the firm to study outsourcing agreements. We develop an original approach of contract complexity and analyse the links among exchange hazards (i.e. specificity and environmental uncertainty), the contractual aspects of outsourcing (control, incentives, penalties, price and flexibility clauses) and the level of ex post transaction costs. Both contract complexity and ex post transaction costs are operationalized and measured. Our empirical research analyses 82 outsourcing contracts. This article uses three different dimensions (proximity to the core business, switching costs and adaptation costs) to assess the strategic importance of an outsourced activity. Our findings extend TCE's validity for the outsourcing of activities with a strategic value. Finally, this study offers an indirect measurement of ex post transaction costs. In short, to restrict vendor opportunism, contracts must contain incentives and penalties, as well as pricing and monitoring clauses.     

The intensity of incentives in firms and markets: Moral hazard with envious agents

While most market transactions are subject to strong incentives, transactions within firms are often not explicitly incentivized. This paper offers an explanation for this observation based on the assumption that agents are envious and suffer utility losses if others receive higher wages. We analyze the impact of envy on optimal incentive contracts in a general moral hazard model and isolate the countervailing effects of envy on the costs of providing incentives. We show that envy creates a tendency towards flat-wage contracts if agents are risk-averse and there is no limited liability. Empirical evidence suggests that social comparisons are more pronounced among employees within firms than among individuals that interact in markets. Flat-wage contracts are then more likely to be optimal in firms.     

Measuring a contract's breadth: A text analysis

We use a computational linguistic algorithm to measure the topics covered in teacher contracts. Topic modeling metrics are used to assess a contract's expansiveness. Our topic, diversity measurement, is then related to the prevalence of support staff. If more specialized services are provided, then contracts should be broader as they cover more employment relationships. We confirm a strong, statistically significant relationship and, thus, have a valid measurement of contract breadth.     

Effects of Target Timing and Contract Frame on Individual Performance

Abstract

This study experimentally examines the effects of target timing and contract frame on individual performance. We study four target-based incentive contracts, categorised by when participants learn the performance target (ex ante, or before production starts, vs. ex post, or after production ends) and how the incentive contract is framed (bonus vs. penalty). The performance target in this study is determined by a peer group's average productivity. We find that performance is significantly higher for bonus-framed contracts when the performance target is revealed ex post, as opposed to ex ante. In contrast, revealing the peer-based performance target ex ante or ex post has no impact on performance for penalty-framed contracts. We also find that the ex post, bonus-framed contract significantly outperforms the other three contracts. This finding supports practitioners' claim that employers should reward (as opposed to punish) individuals based on their performance, relative to that of their peers, ex post.