nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒09‒03
nine papers chosen by
Tommaso Reggiani
University of Cologne

  1. Employee Compensation in Entrepreneurial Companies By Bengtsson, Ola; Hand, John R. M.
  2. Human capital externalities, departmental co-authorship and research productivity. By Frank Neri; Joan Rodgers
  3. Subjective performance evaluations and reciprocity in principal-agent relations By Alexander Sebald; Markus Walzl
  4. "Payment Mechanisms in the Healthcare Industry: An Experimental Study of Physician Incentives in a Multiple Principal Agent Setting" By Ellen P. Green
  5. Appropriate Technology, Human Capital and Development Accounting By Areendam Chanda; Beatrice Farkas
  6. Impact of Working Hours on Work-Life Balance By Sarah Holly; Alwine Mohnen
  7. Trade Union Membership and Sickness Absence: Evidence from a Sick Pay Reform By Laszlo Goerke; Markus Pannenberg
  8. Managing People in Organizations: Perspectives of Creativity, Innovation and Entrepreneurship By Dissanayake, D.M.N.S.W.
  9. Evidence on the Impact of Education on Innovation and Productivity By Junge, Martin; Severgnini, Battista; Sørensen, Anders

  1. By: Bengtsson, Ola (Research Institute of Industrial Economics (IFN)); Hand, John R. M. (University of North Carolina Chapel Hill)
    Abstract: Despite the central role played by human capital in entrepreneurship, little is known about how employees in entrepreneurial firms are compensated and incentivized. We address this gap in the literature by studying 18,935 non-CEO compensation contracts across 1,809 privately-held venture-backed companies. Our key finding is that employee compensation varies with the degree to which VCs versus founders control the business. We show that relative to founder-controlled firms, VC-controlled firms pay their hired-on (i.e., non-founder) employees higher cash salaries, provide stronger cash and equity incentives, and have more formal pay policies in place. We also observe that founder employees earn less cash pay and face weaker cash incentives than do hired-on employees, but have stronger equity incentives. We propose that the compensation differences we identify arise because the preferences and capabilities of controlling shareholders significantly influence the quality of the human capital attracted and retained by the firm.
    Keywords: Venture capital; Entrepreneurship; Compensation contracts
    JEL: G24 J31 L26
    Date: 2012–08–13
  2. By: Frank Neri (University of Wollongong); Joan Rodgers (University of Wollongong)
    Abstract: Lucas (1988) hypothesised that human capital externalities explain persistent productivity growth and become manifest via interactions between workplace colleagues. Consistent with the first part of this hypothesis, Fox and Milbourne (2006) concluded that an increase in the average level of human capital in Australian economics departments raised the research productivity of departmental members. This paper tests the robustness of this finding by using a direct, rather than a proxy, measure of human capital and confirms the existence of human capital externalities within Australian economics departments. But we go further by investigating the second part of Lucas’ hypothesis. Whilst there are numerous ways in which departmental colleagues may interact, we investigate whether the externality becomes manifest via co-authorship. We find no evidence that this type of interaction significantly enhances research productivity, especially for higher quality outputs.
    Keywords: productivity; externalities; human capital
    JEL: J24 D62
    Date: 2012
  3. By: Alexander Sebald; Markus Walzl
    Abstract: We conduct a laboratory experiment with agents working on and principals benefitting from a real effort task in which the agents' performance can only be evaluated subjectively. Principals give subjective performance feedback to agents and agents have an opportunity to sanction principals. In contrast to existing models of reciprocity we find that agents tend to sanction whenever the feedback of principals is below their subjective self-evaluations even if agents' payoffs are independent of it. In turn, principals provide more positive feedback (relative to their actual performance assessment of the agent) if this does not affect their payoffs.
    Keywords: Contracts, Subjective Performance Evaluations, Reciprocity
    JEL: D01 D02 D82 D86 J41
    Date: 2012–08
  4. By: Ellen P. Green (Department of Economics, University of Delaware)
    Abstract: Current failures in the healthcare industry emphasize the need for a more fundamental understanding of how these contracts incentivize doctors. To aid this understanding, we treat the established physician-client-employer relationship as a multiple principal agent problem. We use a laboratory experiment, with a real-effort task, to test the relative performance of common payment mechanisms employed in this dual-principal agent relationship (Piece Rate, Flat Rate, Salary, Bonus, and Socialization). This study suggests, contrary to standard contract theory, that relying on extrinsic incentives to motivate physicians may be detrimental and costly for the healthcare industry.
    Keywords: Multiple principal agent theory, intrinsic motivation, other-regarding behavior, Fee-For-Service, Capitation, Salary
    JEL: I10 I12 I18 J01 J3 L2
    Date: 2012
  5. By: Areendam Chanda; Beatrice Farkas
    Abstract: Over the past decade, research explaining cross country income differences has increasingly pointed to the dominant role of total factor productivity (TFP) gaps as opposed to factor accumulation. Nevertheless, it is a widely held belief that a country's ability to absorb and implement technologies is tied to its human capital. In this paper, we implement this idea in a novel specification and explore its quantitative implications within a development accounting framework. In our model, intermediate goods production takes place over a range of industries, and human capital ratios in a country influence industry specific productivities asymmetrically. As a result, in human capital abundant countries, production is concentrated around industries with high TFP, while in low human capital countries, production is concentrated around industries with low TFP. Development accounting exercises for a range of parameter values suggest that this human capital-technology complementarity may account for eighteen to twenty five percent of differences in GDP per worker which is higher than the combined direct contribution of factors of production.
    Keywords: Development accounting, total factor productivity, technology-<br /> skill complementarity, appropriate technology, human capital
    JEL: O14 O3 O47
    Date: 2012
  6. By: Sarah Holly; Alwine Mohnen
    Abstract: To examine the influence of working hours on employees’ satisfaction, this article uses a large, representative set of panel data from German households (GSOEP). The results show that high working hours and overtime in general do not lead to decreased satisfaction. Rather, increasing working hours and overtime have positive effects on life and job satisfaction, whereas the desire to reduce working hours has a negative impact on satisfaction. In 2009, nearly 60% of employees wanted to reduce their working hours. The overall number of hours by which employees want to reduce their working time is driven mainly by overtime compensation.
    Keywords: Satisfaction, overtime, work–life balance, working hours, working time arrangements
    JEL: J22 J28 J81 M12
    Date: 2012
  7. By: Laszlo Goerke; Markus Pannenberg
    Abstract: In 1996, statutory sick pay was reduced for private sector workers in Germany. Using the empirical observation that trade union members are dismissed less often than non-members, we construct a model to predict how absence behaviour will respond to the sick pay reform. We show that union members may have stronger incentives to be absent and to react to the cut in sick pay. In the empirical investigation, we find a positive relationship between trade union membership and absence due to sickness and observe more pronounced reactions to the cut in sick pay among union members than among non-members. These findings suggest that more flexibility in the use of paid absence due to sickness constitutes a private gain from trade union membership.
    Keywords: Difference-in-differences, sickness-related absence, Socio-Economic Panel (SOEP), statutory sick pay, trade union membership
    JEL: I18 J51 J22
    Date: 2012
  8. By: Dissanayake, D.M.N.S.W.
    Abstract: The business environment is highly intense and every corporate is seeking for strategies for survival and positioning the value proposition in a proper manner. Besides, the human factor is considered as vital in this regard. Properly selected, recruited, trained, motivated and performing individuals are a key asset for any organization regardless of the business sector. Thus the function of human resourcing is considered as imperative. Further, in the perspective of strategic, the HR department intends to develop HR plans and strategies which are aligning to the organizational strategic direction and the overall business strategy. Various tools and procedures need to be identified in order to execute the strategy. This review detailed about the importance of human resource management in recent business challenges and how the value depends on upon the effective execution of human resource framework. Pertaining empirical investigations have also used to illustrate the importance of managing people at work.
    Keywords: Entrepreneurship; Human Resource Management
    JEL: Z00 O15 L26
    Date: 2012–08–24
  9. By: Junge, Martin; Severgnini, Battista (Department of Economics, Copenhagen Business School); Sørensen, Anders (Department of Economics, Copenhagen Business School)
    Abstract: This paper investigates the importance of the educational mix of employees at the rm level for the probability of rms being involved in innovation activities. We distinguish between four types of innovation: product, process, organisational, and marketing innovation. Moreover, we consider three di erent types of education for employees with at least 16 years of schooling: technical sciences, social sciences, and humanities. Furthermore, we examine the in uence of these di erent innovation activities on rm productivity. Using a rotating panel data sample of Danish rms, we nd that di erent types of innovations are related to distinct educational types. Moreover, we nd that rms that adopt product and marketing innovation are more productive than rms that adopt product innovation but not marketing innovation and rms that adopt marketing innovation but not product innovation. In addition, rms that adopt organisational and process innovation demonstrate greated productivity levels than forms that adopt organisational innovation but not process innovation that again demonstrate greater productivity than rms that do not adopt process innovation but not organisational innovation. Finally, we establish that product and marketing innovation as well as organisational and process innovation are complementary inputs using formal tests for supermodularity. Complementarity can be rejected for all other pairs of innovation types.
    Keywords: educational composition; human capital; innovation; productivity; complementarity
    JEL: D24 J24 O31 O32
    Date: 2012–07–16

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