Who Has a Better Idea? Innovation, Shared Capitalism, and HR Policies
NBER Working Paper No. 14234
We investigate the relationship of "shared capitalist" compensation systems - profit/gainsharing, employee ownership, and stock options - to the culture for innovation and employees' ability and willingness to engage in innovative activity. Using a large dataset with over 25,000 employee surveys in over 200 worksites of a large multinational organization, we find that both shared capitalism compensation and high performance work policies contribute to these innovation outcomes. Owning company stock is the most consistently positive compensation variable in predicting both an innovation culture and willingness to engage in innovative activity. We also find that shared capitalism and high performance work policies have stronger effects in predicting an innovation culture when they are combined, and that the effects of shared capitalism and high performance work policies are partially, but not wholly, mediated through greater employee alignment with company strategy. The findings are consistent with agency theories predicting that the principal agent problem can be addressed by a combination of shared incentives and cooperative culture which encourages mutual monitoring and opportunities to share information.