Fresh Management
Labor Force Demographics and Corporate Innovation
François Derrien, Ambrus Kecskes & Phuong-Anh Nguyen
Review of Financial Studies, forthcoming
Abstract:
Firms in younger labor markets produce more innovation. We establish this by instrumenting the current labor force with historical births in each local labor market in the United States. Analyses of firms and inventors allow us to rule out unobservable heterogeneity across local labor markets and firms, life cycles, and other effects. Corporate innovation in younger labor markets reflects the innovative characteristics of younger labor forces, and its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel.
The Monitoring Role of Social Media
Jonas Heese & Joseph Pacelli
Harvard Working Paper, November 2022
Abstract:
In this study, we examine whether social media activity can reduce corporate misconduct. We use the staggered introduction of 3G mobile broadband access across the United States to identify exogenous increases in social media activity and test whether access to 3G reduces misconduct. We find that facilities reduce violations by 1.8% and penalties by 13% following the introduction of 3G in a local area. To validate social media activity as the underlying mechanism, we show that 3G access results in sharp increases in Tweet volume and that facilities located in areas with high Tweet volume engage in less misconduct. The effect of 3G access on misconduct is stronger for facilities of more visible firms and concentrated in non-financial violations, such as those involving unsafe workplace conditions and inappropriate treatment of employees and customers. Overall, our results demonstrate that social media plays an important role in monitoring corporate misconduct.
Trading on Talent: Human Capital and Firm Performance
Anastassia Fedyk & James Hodson
Review of Finance, forthcoming
Abstract:
How is technically-skilled human capital reflected in firm performance? We leverage a uniquely detailed employer-employee matched dataset to measure U.S. firms' technical human capital in IT, Software Engineering, Mobile Networks, Data Analysis, and Web Development. All five technical skillsets are associated with higher firm valuations. However, they negatively forecast both financial and operational performance in the future. For example, a one-standard-deviation increase in employees with IT skills corresponds to 2.2% higher Tobin's q but predictable future returns of -10 basis points per month. Our results are stronger in tighter labor markets, in firms with more cash, and during time periods when each technical skillset is especially popular. These patterns suggest that the market expects too much from popular technologies, leading to overvaluation. Overall, our results highlight how corporate over-investment can extend to intangible capital such as skilled employees.
Competition-level code generation with AlphaCode
Yujia Li et al.
Science, 9 December 2022, Pages 1092-1097
Abstract:
Programming is a powerful and ubiquitous problem-solving tool. Systems that can assist programmers or even generate programs themselves could make programming more productive and accessible. Recent transformer-based neural network models show impressive code generation abilities yet still perform poorly on more complex tasks requiring problem-solving skills, such as competitive programming problems. Here, we introduce AlphaCode, a system for code generation that achieved an average ranking in the top 54.3% in simulated evaluations on recent programming competitions on the Codeforces platform. AlphaCode solves problems by generating millions of diverse programs using specially trained transformer-based networks and then filtering and clustering those programs to a maximum of just 10 submissions. This result marks the first time an artificial intelligence system has performed competitively in programming competitions.
National Wage Setting
Jonathon Hazell et al.
NBER Working Paper, November 2022
Abstract:
How do firms set wages across space? Using job-level vacancy data and a survey of HR managers, we show that 40-50% of a job's posted wages are identical across locations within a firm. Moreover, nominal posted wages within the firm vary relatively little with local prices, a pattern we verify with other measures of job level wages. Using the co-movement of wage growth across establishments, we argue these patterns reflect national wage setting -- a significant minority of firms choose to set the same nominal wage for a job across all their establishments, despite varying local labor market conditions.
Borrow from Employees: Evidence from Payday Reforms
Zhao Zhang
University of Southern California Working Paper, October 2022
Abstract:
Employees often supply labor to firms first and then get paid later. This paper shows that such implicit labor trade credits or short-term borrowing are important for both firms and employees. Using state payday frequency reforms between the 1860s and the 1930s, I find that firms decreased in employment size after being required to pay employees more frequently, which reduced the amount of borrowing from employees. However, the employees who were not laid off were more productive and earned higher wages. Despite decreased labor demand, households, on average, were better off as demonstrated by an increase in home ownership, especially those households that were severely financially constrained, such as low-income minorities and females. Given this tradeoff between firms and employees, a stylized framework suggests that, when not financially constrained or with no good investment opportunities, firms should pay their employees more frequently.
The streak-end rule: How past experiences shape decisions about future behaviors in a large-scale natural field experiment with volunteer crisis counselors
Polly Kang, David Daniels & Maurice Schweitzer
Proceedings of the National Academy of Sciences, 8 November 2022
Abstract:
Decisions about future behaviors are clearly shaped by the content of past experiences, but whether the order of past experiences matters remains controversial. By analyzing the largest field experiment about prosocial behavior to date, a natural field experiment involving 14,383 volunteer crisis counselors over five years, we examine how the content and order of past experiences causally influence decisions about future behaviors - whether individuals continue volunteering or quit. Volunteers were repeatedly and randomly assigned to perform 1,976,649 prosocial behaviors that were either harder (suicide conversations) or easier (non-suicide conversations). We found that the content of past experiences mattered: Harder (versus easier) behaviors encouraged quitting. However, the order of past experiences mattered far beyond their content alone: Harder behaviors caused disproportionately more quitting if they came in long "streaks" or at the "end." These "streak"/"end" effects reveal important practical insights for leaders and policymakers seeking to boost prosocial behavior. For instance, a reordering intervention - assigning behaviors so as to avoid creating hard "streaks" - would reduce volunteer quitting rates by at least 22%, boosting prosocial behavior and likely saving lives.
The Ratchet Effect: Theory and Empirical Evidence
Michal Matějka, Matthias Mahlendorf & Utz Schäffer
Management Science, forthcoming
Abstract:
Using current performance to set future targets can discourage effort and reduce performance. Our study examines whether this ratchet effect also undermines incentives of high-level managers and executives. We use a dynamic model to show that empirical tests used in prior literature can falsely reject the null hypothesis of no ratchet effect. We also motivate a new test that can better detect the adverse incentives effects of target setting. Specifically, we show that the ratchet effect can be identified as the effect of past performance on changes in perceived target difficulty. We use panel data from nine annual 2011-2019 surveys to implement this test. Similar to prior studies, we find strong evidence that targets are revised upward following good performance. Nevertheless, we reject the ratchet effect hypothesis because we further find that good performance in one period is associated with a decrease in perceived target difficulty in the next period. This finding is more pronounced in settings where well-performing managers have more private information about future performance and where long-term commitments are more credible.
Embodying the Market: The Emergence of the Body Entrepreneur
Alexandra Michel
Administrative Science Quarterly, forthcoming
Abstract:
When organizations take radically new forms, employees' minds and bodies can also take radically new forms, but prior organizational research has lacked the concepts and data to understand such qualitative changes in persons. For 17 years, I studied a profound societal change, the market turn, inside organizations at their center, investment banks on Wall Street. The banks took a new, market-like form that facilitated the emergence of a cultural-historical new form of personhood, the body entrepreneur. Unlike traditional organizations, which predictably reward employee effort, the banks gradually decoupled rewards from effort, paying bankers for winning first internal and then external competitions and increasingly exposing them to market risk. Bankers internalized this entrepreneurial positioning by transforming their minds and bodies into resources for competitive success regardless of health consequences. As rewards became more elusive, bankers invested more resources, first the mind and then the body, and controlled them in progressively more powerful ways, first through cognitive techniques, then through self-experimentation with drugs. Bankers thus intervened more radically in their minds and bodies than organizations legitimately can, resulting in two qualitative person changes. One, bankers constructed personhood in cultural-historical new ways, changing from the traditional psychological self, which locates processes such as emotions and motivation in the mind, toward a somatic self, the body entrepreneur, which locates them in the body as brain states that bankers could self-design. Two, the body functioned in new ways: not inside-out as a biological imperative but outside-in, fluidly adjusting to changing situations. Whereas prior organizational theories have assumed what the body is, I problematize it, empirically studying the self-technologies through which people construct the culturally situated biologies that compel them to unproblematically reproduce new, market-like organizations.