Lines of authority
Brett Myers & Alessio Saretto
Management Science, forthcoming
Abstract:
We use contract negotiation data to study how leverage affects the interaction between firms and an important nonfinancial stakeholder, labor unions. Consistent with the idea that leverage diminishes the bargaining position of labor, we find that unions are less likely to strike when a firm has high leverage or increases leverage prior to a contract negotiation. We also find large leverage increases after a strike, consistent with the idea that firms intentionally use leverage to improve their bargaining position. This poststrike increase in leverage is particularly pronounced when the union wins the strike. Moreover, we do not find any clear indication that such increases in leverage are linked to changes in investments. In addition, firms that experience a strike subsequently invest more internationally and in right-to-work states where union are afforded fewer legal protections, and they increase their disposal of production units that are located in states where strikes have occurred.
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Performance Feedback Does Not Eliminate the Sunk-Cost Fallacy: Evidence From Professional Football
Quinn Keefer
Journal of Labor Research, December 2015, Pages 409-426
Abstract:
Empirical studies on the influence of sunk costs in high stakes decisions have come to mixed conclusions. As observational studies have primarily used professional sports labor markets, we analyze the effect of sunk costs, player compensation, on the labor utilization of defensive players in the National Football League (NFL). Our analysis has several advantages. First, we measure the direct impact of increased financial commitment. Second, we analyze the effect of sunk costs when firms have accurate and abundant performance feedback; therefore, our conclusions are not driven by uncertainty. Finally, we control for possible endogeneity by using the exogenous variation in compensation generated when players become eligible for free agency or change teams. Our results indicate sunk costs are significant determinants of player utilization. A 15 % increase in compensation has an equivalent effect on playing time as an increase of five to eleven solo tackles, one to two interceptions and two to five and a half sacks in the previous season for linebackers, defensive backs and defensive linemen respectively. Furthermore, the sunk-cost fallacy is persistent throughout the entire career of an average NFL player.
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Mitchell Hoffman, Lisa Kahn & Danielle Li
NBER Working Paper, November 2015
Abstract:
Who should make hiring decisions? We propose an empirical test for assessing whether firms should rely on hard metrics such as job test scores or grant managers discretion in making hiring decisions. We implement our test in the context of the introduction of a valuable job test across 15 firms employing low-skill service sector workers. Our results suggest that firms can improve worker quality by limiting managerial discretion. This is because, when faced with similar applicant pools, managers who exercise more discretion (as measured by their likelihood of overruling job test recommendations) systematically end up with worse hires.
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Do Managers Matter for Corporate Innovation?
Chan Ho Cho et al.
Journal of Corporate Finance, February 2016, Pages 206-229
Abstract:
This paper examines the ability of latent firm and manager characteristics to explain variation in innovation productivity. Evidence suggests that latent, but not observable, firm and manager characteristics explain a large portion of the variation in a firm's innovation productivity. Our tests mostly show that latent firm characteristics explain slightly more of the variation relative to latent manager characteristics. For robustness, our analysis shows no significant difference in the average change in innovation productivity and in abnormal returns following two different samples of manager-firm separations: one where managers' expected innovation abilities are high and the other a random sample. Overall, the results suggest that compared to firm characteristics, managers matter moderately less for corporate innovation.
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Bruce Kaufman
Industrial Relations, January 2016, Pages 3-39
Abstract:
This paper reexamines American experience with company unions (also known as nonunion employee representation plans) before they were banned by the Wagner Act (1935). For the half-century following the passage of the act, labor historians and industrial relations scholars painted a bleak portrait of company unions as anti-union sham organizations. Since the 1980s, additional research has documented a more positive side; similarly, concern has grown that the Wagner Act's ban is stifling legitimate employee participation programs. This paper brings new theoretical and empirical evidence to both historical and legal parts of this debate, including examination of company unions through individualist, unitarist, pluralist, and radical frames; demonstration that the pluralists' view of company unions was more diverse and positive than conventionally portrayed; presentation of new historical evidence and testimony on the company union experience; and a substantially revisionist assessment of the merits of the Wagner Act's ban. In particular, the conclusion is that, given any reasonable weighting of the four frames, the company union ban is overly restrictive and should be modified so companies can implement the positive side of nonunion employee committees but not the negative. The paper ends by noting that the unbalanced and narrowly critical treatment of company unions in the mainline industrial relations tradition is a case study of the field's perhaps fatal post-World War II core intellectual-normative contradiction - professed inclusiveness of all frames of employment relations but, in practice, attention to and preference for a narrow union-centric version of one frame.
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Motivating Agents: How Much Does the Mission Matter?
Jeffrey Carpenter & Erick Gong
Journal of Labor Economics, January 2016, Pages 211-236
Abstract:
Economic theory predicts that agents work harder if they believe in the mission of the organization. We conduct a real-effort experiment with workers whose mission preferences are known, randomly assigning them to organizations with clear missions to create both matches and mismatches. Our estimates suggest that matching is a strong motivator, especially compared to mismatches. Further, we find that performance pay increases effort, though mostly among mismatched workers who substitute pay for matching. Our results suggest the importance of defining a clear mission to an organization and highlight the significance of sorting, screening, and compensation policies.
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Patricia Hewlin, Tracy Dumas & Meredith
Burnett Academy of Management Journal, forthcoming
Abstract:
When employees feel that their values do not match the organization's values, they often respond by pretending to fit in. We examine how leader integrity influences the tendency to create facades of conformity, proposing that employees will actually fake more when leaders are principled. In a laboratory experiment (Study 1), undergraduate students whose values ostensibly differed from their discussion group members and the university administration created more facades when they perceived the discussion group leader as having high integrity. A two-wave survey of employed adults (Study 2), replicated the moderation effect and also revealed negative effects of facade creation on work engagement. In both studies, our results indicate that, ironically, when leader integrity is high, the tendency to create facades of conformity in response to low values congruence is magnified. Additionally, our findings shed light on the notion that positive attributes in leaders may not always result in positive responses from followers. The results from our study also show that facades of conformity may serve as a partial explanatory mechanism in the relationship between values congruence and employee engagement.
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Ashley Mandeville, Jonathon Halbesleben & Marilyn Whitman
Personnel Psychology, forthcoming
Abstract:
Despite their increasing popularity, family-friendly benefits are frequently underutilized. Drawing on literatures concerning social norms and pluralistic ignorance, this study examines the role of personal preference, group norm misalignment, and misperception of group norms on employees' utilization of family-friendly benefits. In two samples (154 firefighters and 440 nurses) across three data collection periods, we found that when employees' preferences for benefit utilization were misaligned with the perceived group norm, they adjusted their family-friendly benefit utilization in a manner congruent with the norm, even when that norm was misperceived. Further, we found that family-friendly benefit utilization was negatively associated with work-family conflict. Together, our findings suggest that misperceived social norms regarding family-friendly benefit utilization can lead to situations whereby employees do not utilize family-friendly benefits because they mistakenly perceive utilization is not socially accepted and, as a result, experience higher work-family conflict.