nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒10‒13
eleven papers chosen by
Tommaso Reggiani
University of Cologne

  1. The Impact of Managerial Change on Performance: The Role of Team Heterogeneity By Hentschel, Sandra; Muehlheusser, Gerd; Sliwka, Dirk
  2. The Value of Bosses By Edward P. Lazear; Kathryn L. Shaw; Christopher T. Stanton
  3. Team building and hidden costs of control By Riener, Gerhard; Wiederhold, Simon
  4. Incentive Effects of Bonus Taxes in a Principal-Agent Model By Helmut M. Dietl; Martin Grossmann; Markus Lang; Simon Wey
  5. Incentive Design and Manager Performances: an ABM Approach By Concetta Sorropago
  6. Flexible Work Time in Germany: Do Workers Like It and How Have Employers Exploited It Over the Cycle? By Jennifer Hunt
  7. The competitive advantage of a peripheral university town: Human and social capital perspectives from Joensuu, Finland By Teemu Makkonen
  8. A Note on Organizational Design and the Optimal Allocation of Environmental Liability By de, Vries Frans; Franckx, Laurent
  9. The Role of Job Satisfaction in Transitions into Self-Employment By G. Guerra; R. Patuelli
  10. Does working with spouses make teams more productive? A field experiment in India using NREGA By Alistair Munro; Arjan Verschoor; Amaresh Dubey
  11. The Rise of Skills: Human Capital, the Creative Class and Regional Development By Mellander, Charlotta; Florida, Richard

  1. By: Hentschel, Sandra (University of Bielefeld); Muehlheusser, Gerd (University of Hamburg); Sliwka, Dirk (University of Cologne)
    Abstract: When a key responsibility of a manager is to allocate more or less attractive tasks to subordinates, these subordinates have an incentive to work hard and demonstrate their talents. As a new manager is less well acquainted with these talents this incentive mechanism is reinvigorated after a management change – but only when the team is sufficiently homogenous. Otherwise, a new manager quickly makes similar choices as the old one did. We investigate this hypothesis using a large data set on coach dismissals in the German football league where the selection of players is indeed a key task of the coach. Indeed, we find substantial evidence that coach replacements enhance team performance (only) in homogenous teams. Moreover, from a methodological point of view, we argue that there is typically a negative selection bias when evaluating succession effects, which might reconcile previous findings of no (or even negative) effects with the vast number of dismissals observed in reality.
    Keywords: managerial succession, teams, heterogeneity, tournaments
    JEL: D22 J44 J63
    Date: 2012–09
  2. By: Edward P. Lazear (Stanford University); Kathryn L. Shaw (Stanford University); Christopher T. Stanton (University of Utah)
    Abstract: How and by how much do supervisors enhance worker productivity? Using a company-based data set on the productivity of technology-based services workers, supervisor effects are estimated and found to be large. Replacing a boss who is in the lower 10% of boss quality with one who is in the upper 10% of boss quality increases a team’s total output by about the same amount as would adding one worker to a nine member team. This implies that the average boss is about 1.75 times as productive as the average worker. Additionally, boss’s primary activity is teaching skills that persist.
    Date: 2012–10
  3. By: Riener, Gerhard; Wiederhold, Simon
    Abstract: This paper investigates the interaction of intrinsic and extrinsic incentives. We propose a simple principal-agent model with control that incorporates the existence of social groups resulting from common experiences in the past. Our laboratory experiment shows that agents with previous common experiences with their principals (CE agents) perform better than agents without such experiences (NCE agents). However, as soon as actual control exceeds their expectation, CE agents decrease their performance substantially, which has no equivalent for NCE agents. This pronounced decrease in effort when control is perceived as excessive represents a novel channel through which hidden costs of control materialize. Our results have important implications for firms' strategies to motivate employees. --
    Keywords: Employee motivation,Principal-agent theory,Experiments
    JEL: C92 M54 D03 J22
    Date: 2012
  4. By: Helmut M. Dietl (Department of Business Administration (IBW), University of Zurich); Martin Grossmann (Department of Business Administration (IBW), University of Zurich); Markus Lang (Department of Business Administration (IBW), University of Zurich); Simon Wey (Department of Business Administration (IBW), University of Zurich)
    Abstract: Several countries have implemented bonus taxes for corporate executives in response to the financial crisis of 2007-2010. Using a principal-agent model, this paper investigates the incentive effects of bonus taxes by analyzing the agent's and principal's behavior. Specifically, we show how bonus taxes affect the agent's incentives to exert effort and the principal's decision regarding the composition of the compensation package (fixed salary and bonus rate). We find that, surprisingly, a bonus tax can increase the bonus rate and decrease the fixed salary. In addition, a bonus tax can induce the principal to pay higher bonuses even though the agent's effort always decreases.
    Keywords: Principal-agent model, bonus tax, executive compensation, incentive, pay regulation
    JEL: H24 J30 M52
    Date: 2012–08
  5. By: Concetta Sorropago (University of Roma "Tor vergata", Italy)
    Abstract: We present a simplified model to provide a virtual laboratory to test the effects of the use of different performance evaluation measures to design manager’s incentives in a project-based professional service organization. Our company’s owner has to cope with the scheduling of multiple resource constraint projects in real time (RCMPSP), and with the design of the production manager incentive, whose variable wage is tied to some measures of the performance, which are proxies of the original owner’s goal. We propose an agent based model approach where the agents’ intelligence lies in the choice of the scheduling sequences. A discrete event simulator (DES) executes the projects, allocating in real time, the limited resources available. A Genetic Algorithm, evolving the sequence, randomly generated, uses the DES to simulate the effect and ranks the solutions. In this way, we investigate the incentive alignment problem as a resource allocation problem, comparing the results deriving from their respective "good solutions".
    Keywords: Complex System Dynamics, Resource constrained multi project scheduling, Incentive Design, Performance Evaluation Measures, Genetic Algorithm
    JEL: C63 D23 L2 M12
    Date: 2012–05
  6. By: Jennifer Hunt
    Abstract: After describing qualitatively the increasingly flexible organization of work hours in Germany, I turn to the German Socio-Economic Panel to quantify practices and trends, and assess their effects on workers and employers. Measuring flexibility as the extent to which overtime is compensated with time off, and hence receives no overtime premium, I show that hourly{paid workers have undergone a regime shift towards more flexibility since 1984, while salaried workers have maintained an already high level of flexibility. I find weak evidence that flexibility causes workers to be slightly less satisfied with their work and more satisfied with their leisure. Over the boom and bust cycle of 2004-2009, I find that for hourly-paid workers in manufacturing, paid and unpaid overtime hours were equally cyclical, but that the cycle for unpaid overtime led the cycle for paid overtime. The results suggest that while the new practices do free employers to make more cyclical adjustments in hours, they have not eliminated the need for adjustments in paid overtime. I identify as constraints ceilings on cumulated overtime hours to be compensated with time off and the window within which the compensation in time off must occur.
    Date: 2012
  7. By: Teemu Makkonen
    Abstract: The positive impacts of social and human capital on individual, firm and geographical level are well known. Accordingly, the literature on social capital has advocated the impacts of social networks, norms and trust in securing individual and mutual benefits. Already, the early literature on human capital was concentrated on the economic advantage of individuals, that is, on the impact of education on wage levels. Recent economic studies underline the importance of human capital in creating firm-level innovations and fostering regional economic development. The role of universities has been highlighted in this discussion. However, it seems that this educated human capital is geographically concentrated on the largest urban regions. Whether, this imposes difficulties for firms located in more peripheral regions is discussed here with a case study from a small university town of Joensuu situated in peripheral Eastern Finland. The proposition presented here is that the negative impacts of locational factors, in the periphery, and having a small labour pool will be partially compensated with close social ties and worker immobility. First, the question is approached through official statistics showing that the mobility of educated workforce is smaller in more rural and peripheral regions compared to that of the capital and other densely-populated regions of Finland. Second, the tentative picture drawn from the statistics is deepened with data from semi-structured thematic interviews conducted in Joensuu. The main stakeholders interviewed were chosen, according to the framework of regional innovation systems, from both public and private organizations (n = 15). The results confirm that although a peripheral location of firms does impose limitations to the availability of human capital at hand, the negative impact is compensated with low outmigration of educated workers due to existing well-knit social ties. Furthermore, employee loyalty to their employers is high in Joensuu, that is, the thinner possibilities for other employment renders the educated workforce in Joensuu relatively immobile even in intraregional scale. Although, worker immobility can be seen as a drawback for a region it can also be considered as a regional asset for firms that have decided to locate their activities in Joensuu, as it saves the firms from the mandatory allocation of resources to the training and introductory procedures of new employees. Accordingly, a local university both attracts and supplies educated workers in the region for the benefit of local enterprises and is an important partner in cooperation for local firms.
    Date: 2012–10
  8. By: de, Vries Frans; Franckx, Laurent
    Abstract: A multi task principal-agent model is employed to derive optimal environmental liability rules for risk neutral managers under two alternative organizational structures - a functional organization and a product-based organization. For a product-based organization it is shown that efficiency is independent of whether the firm or managers are liable for environmental damages. In a functional organization it is optimal either to hold the firm liable for environmental damages or, equivalently, not to hold the production managers liable for environmental damages. We derive conditions to obtain the first-best solution for a given organizational structure. Finally, the organizational form that induces the highest environmental effort induces the lowest production effort and vice versa. This suggests that production and environmental protection are substitutes rather than c omplements.
    Keywords: organizations; principal-agent; multi-task; vicarious liability; contr acts
    Date: 2012–05
  9. By: G. Guerra; R. Patuelli
    Abstract: As observed in many advanced economies experiencing an increase of self-employment rates since the late 1970s, a flourishing small- and medium-size enterprise sector is traditionally associated with positive economic development and growth. In the regional context, areas benefiting from an established entrepreneurial culture are in general more successful and innovative, as well as better equipped to sustain structural changes and to lessen unemployment. It is therefore important to investigate the reasons why individuals choose self-employment, and why they do it despite lower protection, higher risks, and possibly more effort than what is required in a comparable wage employment position. Existing research identifies better prospects of entrepreneurial earnings as compared to wages as a major stimulus towards selfemployment. However, besides pecuniary motivations, other factors may be considered when it comes to the occupational choice. These include displacement, uncertainty, (the threat of) unemployment, and (dis)satisfaction. Building on a job quits model, we propose a representation of transition behaviour from wage to self-employment which includes subjective evaluations of pecuniary and nonpecuniary satisfaction on the previous job. Individual microdata are drawn from the Swiss Household Panel (SHP), and cover the time period 1999–2008. Additionally, we focus on the dynamics of job satisfaction in order to highlight the role played by shocks in subjective evaluations, and introduce their interaction with levels to control for threshold effects.
    JEL: C25 J62 M13
    Date: 2012–09
  10. By: Alistair Munro (National Graduate Institute for Policy Studies); Arjan Verschoor (School of International Development, University of East Anglia); Amaresh Dubey (Centre for the Study of Regional Development, Jawaharlal Nehru University)
    Abstract: An important question in labour economics is whether the presence in a work environment of friends or relations lowers or raises productivity. We examine the question using evidence from a simple field experiment in Uttar Pradesh, India with married wives and husbands. Teams of four are engaged to dig soil under the NREGA programme. In one treatment husbands and wives work together; in the other treatment they work in separate teams. We find that working with spouses is associated with significantly higher productivity.
    Date: 2012–09
  11. By: Mellander, Charlotta (Jönköping International Business School); Florida, Richard (University of Toronto)
    Abstract: The past couple of decades have seen what amounts to skills revolution in urban and regional economic research. From industrial location theory and Alfred Marshall’s concern for agglomeration to more recent research on high-tech districts and industrial clusters firms and industries has been the dominant unit of analysis. But since the 1990s there has been a growing focus on skills. This broad research thrust includes studies of human capital; the creative class and occupational class more broadly; and physical, cognitive and social skills, among others. This research highlights the growing geographic divergence of skills across cities and metros and their effects on regional innovation, wages, incomes and development broadly. A growing literature notes the growing importance of place in organizing and mobilizing these skills. Studies have focused on the role of amenities, universities, diversity and other place-related factor in accounting for the growing divergence of skills across locations. This article summarizes the key lines of research that constitute the skills revolution in urban and regional research.
    Keywords: Human capital; creative class; regional development
    JEL: O15 O30
    Date: 2012–03–13

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