Firm-specific human capital, organizational incentives, and agency costs: Evidence from retail banking

Strategic Management Journal

Volumn 35, Issue 9, 2014, Pages 1279-1301

  Frank, Douglas H ^a,b   Obloj, Tomasz ^c  

^a ALLEGHENY COLLEGE   (United States)

^b INSEAD   (France)

^c HEC PARIS   (France)

Author keywords

adverse learning; agency costs; firm specific human capital; organizational incentives; performance pay

Indexed keywords

COSTS; MANAGEMENT; MANAGERS; PROFITABILITY; SALES;

ADVERSE LEARNING; AGENCY COSTS; HUMAN CAPITALS; ORGANIZATIONAL INCENTIVES; PERFORMANCE PAYS;

INDUSTRY;

EID: 84904460714     PISSN: 01432095     EISSN: 10970266     Source Type: Journal    
DOI: 10.1002/smj.2148     Document Type: Article

References (70)

1. Amit R, Schoemaker P,. 1993. Strategic assets and organizational rent. Strategic Management Journal 14 (1): 33-46.
2. Anton J, Yao D,. 2007. Finding "lost" profits: an equilibrium analysis of patent infringement damages. Journal of Law, Economics, and Organization 23 (1): 186-207.
3. Argyres N, Mayer K,. 2007. Contract design as a firm capability: an integration of learning and transaction cost perspectives. Academy of Management Review 32 (4): 1060-1077.
4. Azoulay P, Shane S,. 2001. Entrepreneurs, contracts, and the failure of young firms. Management Science 47 (3): 337-358.
5. Baker GP,. 1992. Incentive contracts and performance measurement. Journal of Political Economy 100 (3): 598-614.
6. Barney J,. 1991. Firm resources and sustained competitive advantage. Journal of Management 17 (1): 99-120.
7. Becker GS,. 1962. Investment in human capital: a theoretical analysis. Journal of Political Economy 70 (5): 9-49.
8. Benkard CL,. 2000. Learning and forgetting: the dynamics of aircraft production. American Economic Review 90 (4): 1034-1054.
9. Blyler M, Coff R,. 2003. Dynamic capabilities, social capital, and rent appropriation: ties that split pies. Strategic Management Journal 24 (7): 677-686.
10. Borenstein S, Shepard A,. 1996. Dynamic pricing in retail gasoline markets. RAND Journal of Economics 27 (3): 429-451.
11. Carpenter M, Sanders G, Gregersen B,. 2001. Bundling human capital with organizational context: the impact of international assignment experience on multinational firm performance and CEO pay. Academy of Management Journal 44 (3): 493-511.
12. Ceci SJ, Liker J,. 1986. A day at the races: a study of IQ, expertise, and cognitive complexity. Journal of Experimental Psychology 115 (3): 255-266.
13. Chevalier J, Kashyap A, Rossi P,. 2003. Why don't prices rise during periods of peak demand? Evidence from scanner data. American Economic Review 93 (1): 15-37.
14. Coff R,. 1997. Human assets and management dilemmas: coping with hazards on the road to resource-based theory. Academy of Management Review 22 (2): 374-402.
15. Coff R,. 1999. When competitive advantage doesn't lead to performance: the resource-based view and stakeholder bargaining power. Organization Science 10 (2): 119-133.
16. Conlon E, Parks JM,. 1990. Effects of monitoring and tradition on compensation arrangements: an experiment with principal-agent dyads. Academy of Management Journal 33 (3): 603-622.
17. Dehejia R, Montgomery H, Morduch J., 2012. Does interest rate matter? Credit demand in the Dhaka slums. Journal of Development Economics 97 (2): 437-449.
18. Dencker JC,. 2009. Relative bargaining power, corporate restructuring, and managerial incentives. Administrative Science Quarterly 54 (3): 453-485.
19. Dillman DA,. 1978. Mail and Telephone Surveys: The Total Design Method. Wiley: New York.
20. Earley P, Mosakowski E,. 2000. Creating hybrid team cultures: an empirical test of transnational team functioning. Academy of Management Journal 43 (1): 26-49.
21. Ederer F, Holden R, Meyer M,. 2013. Gaming and strategic ambiguity in incentive provision. Available at: http://papers.ssrn.com/sol3/papers.cfm? abstract-id=2210290 (accessed 10 July 2013).
22. Efron B, Tibshirani R,. 1993. Introduction to the Bootstrap. Chapman & Hall/CRC: Boca Raton, FL.
23. Elsbach K, Bhattacharya CB,. 2001. Defining who you are by what you're not: organizational disidentification and the national rifle association. Organization Science 12 (4): 393-413.
24. Foss NJ,. 2003. Selective intervention and internal hybrids: interpreting and learning from the rise and decline of the Oticon Spaghetti organization. Organization Science 14 (3): 331-349.
25. Gabaix X, Laibson D,. 2006. Shrouded attributes, consumer myopia, and information suppression in competitive markets. Quarterly Journal of Economics 121 (2): 505-540.
26. Gibbons R,. 2005. Incentives between firms (and within). Management Science 51 (1): 2-17.
27. Gimeno J, Folta T, Cooper A, Woo C,. 1997. Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly 42 (4): 750-783.
28. Greene WH,. 2003. Econometric Analysis. Prentice Hall: Englewood Cliffs, NJ.
29. Hall R,. 1992. The strategic analysis of intangible resources. Strategic Management Journal 13 (2): 135-144.
30. Harris J, Bromiley P,. 2007. Incentives to cheat: the influence of executive compensation and firm performance on financial misrepresentation. Organization Science 18 (3): 350-367.
31. Hatch NW, Dyer JH,. 2004. Human capital and learning as a source of sustainable competitive advantage. Strategic Management Journal 25 (12): 1155-1178.
32. Hitt M, Biermant L, Shimizu K, Kochhar R,. 2001. Direct and moderating effects of human capital on strategy and performance in professional service firms: a resource-based perspective. Academy of Management Journal 44 (1): 13-28.
33. Holmstrom B,. 1979. Moral hazard and observability. Bell Journal of Economics 10 (1): 74-91.
34. Holmstrom B, Milgrom P,. 1991. Multitask principal-agent analyses: incentive contracts, asset ownership, and job design. Journal of Law, Economics, and Organization 7: 24-52.
35. Huckman R, Pisano G,. 2006. The firm specificity of individual performance: evidence from cardiac surgery. Management Science 52 (4): 473-488.
36. Huselid M,. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal 38 (3): 635-672.
37. Ichniowski C, Shaw K, Prennushi G,. 1997. The effects of human resource management practices on productivity: a study of steel finishing lines. American Economic Review 87 (3): 291-313.
38. Kerr S,. 1975. On the folly of rewarding A, while hoping for B. Academy of Management Journal 18 (4): 769-783.
39. Kim J, Mahoney JT,. 2010. A strategic theory of the firm as a nexus of incomplete contracts: a property rights approach. Journal of Management 36 (4): 806-826.
40. Koch M, McGrath R,. 1996. Improving labor productivity: human resource management policies do matter. Strategic Management Journal 17 (5): 335-354.
41. Laffont JJ, Tirole J,. 1988. The dynamics of incentive contracts. Econometrica 56 (5): 1153-1175.
42. Larkin I., 2013. The cost of high-powered incentives: employee gaming in enterprise software sales. Journal of Labor Economics. (Forthcoming).
43. Lazear EP,. 2000. Performance pay and productivity. American Economic Review 90 (5): 1346-1361.
44. Lemieux T, MacLeod W, Parent D,. 2009. Performance pay and wage inequality. Quarterly Journal of Economics 124 (1): 1-49.
45. Levinthal D,. 1988. A survey of agency models of organizations. Journal of Economic Behavior and Organization 9 (2): 153-185.
46. MacDonald G, Ryall M,. 2004. How do value creation and competition determine whether a firm appropriates value? Management Science 50 (10): 1319-1333.
47. McLean B, Elkind P,. 2003. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. Penguin: New York.
48. Milgrom P, Roberts J,. 1995. Complementarities and fit strategy, structure, and organizational change in manufacturing. Journal of Accounting and Economics 19 (2-3): 179-208.
49. Murphy K, Jensen M., 2011. CEO bonus plans: and how to fix them. Working paper. Available at: http://ssrn.com/abstract=1935654 (accessed 10 July 2013).
50. Nagin D, Rebitzer J, Sanders S, Taylor LJ,. 2002. Monitoring, motivation, and management: the determinants of opportunistic behavior in a field experiment. American Economic Review 92 (4): 850-873.
51. New York Times. 2010. Wall St. helped to mask debt fueling Europe's crisis. New York Times 13 February: A1.
52. Nonaka I,. 1994. A dynamic theory of organizational knowledge creation. Organization Science 5 (1): 14-37.
53. North DC,. 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press: Cambridge, UK.
54. Obloj T, Sengul M,. 2012. Incentive life-cycles: learning and the division of value in firms. Administrative Science Quarterly 57 (2): 305-347.
55. Oyer P,. 1998. Fiscal year ends and nonlinear incentive contracts: the effect on business seasonality. Quarterly Journal of Economics 113 (1): 149-185.
56. Oyer P,. 2000. A theory of sales quotas with limited liability and rent sharing. Journal of Labor Economics 18 (3): 405-426.
57. Oyer P, Schaefer S., 2011. Personnel economics: hiring and incentives. In Handbook of Labor Economics (Volume 4)., Ashenfelter O, Card D, (eds). Elsevier: San Diego, CA; 1769-1823.
58. Paarsch H, Shearer S,. 1999. The response of worker effort to piece rates: evidence from the British Columbia tree-planting industry. Journal of Human Resources 34 (4): 643-667.
59. Pennings JM, Lee K, Van Witteloostuijn A,. 1998. Human capital, social capital, and firm dissolution. Academy of Management Journal 41 (4): 425-440.
60. Penrose E,. 1959. The Theory of the Growth of the Firm. Wiley: New York.
61. Pierce L,. 2012. Organizational structure and limits of knowledge sharing: incentive conflict and agency in car leasing. Management Science 58 (6): 1106-1121.
62. Rosen S,. 1982. Authority, control, and the distribution of earnings. Bell Journal of Economics 13 (2): 311-323.
63. Sorkin AR,. 2010. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System-and Themselves. Penguin: New York.
64. Vroom G, Gimeno J,. 2007. Ownership form, managerial incentives, and the intensity of rivalry. Academy of Management Journal 50 (4): 901-922.
65. Williamson O,. 1991. Economic institutions: spontaneous and intentional governance. Journal of Law, Economics, and Organization 7: 159-187.
66. Williamson O,. 2005. The economics of governance. American Economic Review 95 (2): 1-18.
67. Wooldridge JM,. 2002. Econometric Analysis of Cross Section and Panel Data. MIT Press: Cambridge, MA.
68. Youndt M, Snell S, Dean J, Lepak D,. 1996. Human resource management, manufacturing strategy, and firm performance. Academy of Management Journal 39 (4): 836-866.
69. Zenger T,. 1994. Explaining organizational diseconomies of scale in R&D: agency problems and the allocation of engineering talent, ideas, and effort by firm size. Management Science 40 (6): 708-729.
70. Zenger T, Marshall C,. 2000. Determinants of incentive intensity in group-based rewards. Academy of Management Journal 43 (2): 149-163.