Work Smarter
The impact of top performers in creative groups
Jared Kenworthy et al.
Psychology of Aesthetics, Creativity, and the Arts, forthcoming
Abstract:
The role of top or "star" performers was examined in an electronic collaborative creativity task. Participants worked in dyads on a series of four idea generation tasks and then participated in two different groups of four on two new idea generation tasks. The composition of the pairs and groups were changed for each new task. The top performers from the paired sessions, in terms of number of ideas or novelty, enhanced the number of ideas generated by the other members in the group sessions. The greater the discrepancy in performance of the top performer and the other group members in terms of number of ideas, the greater the positive impact on the other group members. This research suggests that top performers or "star" team members can have a positive effect on the creative performance of other group members over and above other predictors. We discuss the theoretical and practical implications for including high individual performers in groups.
Startups and Upstarts: Disadvantageous Information in R&D
Yu Awaya & Vijay Krishna
Journal of Political Economy, forthcoming
Abstract:
We study an R&D race between an established firm and a startup under asymmetric information. R&D investment brings success stochastically, but only if the innovation is feasible. The only asymmetry is that the established firm has better information about the feasibility of the innovation. We show that there is an equilibrium in which the poorly informed startup wins more often, and has higher expected profits, than the better-informed incumbent. When the informational asymmetry is large, this is the unique equilibrium outcome. The channel by which better information becomes a competitive disadvantage appears to be new and stems from the fact that better information dulls the incentive to learn from one's rival.
Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation
Mario Daniele Amore, Orsola Garofalo & Victor Martin-Sanchez
Organization Science, forthcoming
Abstract:
Extant research shows that entrepreneurs are typically overly optimistic about their ventures' prospects and that such optimism hampers performance. We analyze how dispositional optimism affects the adjustments to entrepreneurs' expectations after they receive negative feedback on their task performance. We then explore the relationship between optimism and the effectiveness of innovation. Exploiting unique firm-level data and a laboratory experiment involving 205 entrepreneurs, we find that dispositional optimism is negatively associated with both the likelihood and extent of belief updating in response to negative feedback. Furthermore, dispositional optimism triggers a discrepancy - between innovation inputs and outputs - that reduces a firm's innovation effectiveness.
Why Do Banks Favor Employee-Friendly Firms? A Stakeholder-Screening Perspective
Cuili Qian et al.
Organization Science, forthcoming
Abstract:
We investigate why employee-friendly firms often benefit from lower costs of debt financing. We theorize that banks use employee treatment as a screen to assess firms' trustworthiness, which encompasses not only confidence in firms' ability to perform well but also the belief that they will act with good intent toward their creditors. We integrate screening theory and stakeholder theory to explain the - oftentimes unintended - consequences that firms' actions toward employees have on their relationships with other stakeholders. An analysis of U.S. firms between 2003 and 2010 shows that favorable employee treatment reduces the cost of bank loans, and this relationship is stronger when banks cannot infer firms' intent from their relations with stakeholders other than employees. A policy-capturing study provides further support that employee treatment serves as a screen for intent. We discuss the implications of our stakeholder-screening perspective as a novel way to understand the second-order, unintended effects of a focal stakeholder relationship on firms' relations with other stakeholders.
Delays Impair Learning and Can Drive Convergence to Inefficient Strategies
Hazhir Rahmandad & Michael Shayne Gary
Organization Science, forthcoming
Abstract:
With so many possible choices, why do managers adopt the strategies they do? We identify delays between adopting a strategy and observing the full implications of that choice as a critical factor influencing strategic choices. Using a simulation of a service firm, we conduct two behavioral experiments to investigate how delays interact with outcome uncertainty to shape learning, strategy adaptation, and performance outcomes. Two mechanisms emerge from how different subject groups perceive, react to, and learn in the presence of delayed feedback and uncertainty. First, when multiple viable strategies exist, longer delays lead both general participants and experienced managers toward alternatives that have rapid returns. When those alternatives are suboptimal, delays may strengthen convergence to inefficient strategies. Second, delays and uncertainty may also induce learners to persist with their a priori strategies. Managers show larger confidence in their priors and thus underperform general participants when the underlying task structure diverges from those priors. Both mechanisms can undermine performance. Moreover, delays and uncertainty may reduce heterogeneity in strategies and performance in more dynamic, uncertain environments, leading to convergence as tasks grow more complex and where decision makers possess similar priors.
Intentions for Doing Good Matter for Doing Well: The Negative Effects of Prosocial Incentives
Lea Cassar & Stephan Meier
Economic Journal, forthcoming
Abstract:
Many firms consider prosocial initiatives to be an effective tool to motivate workers. However, despite some initial supportive evidence, little is known about when and how prosocial incentives work. Our field experiment shows that the instrumental use of prosocial incentives to increase effort can backfire. The negative effect is particularly strong for performance-based prosocial incentives, which are, by construction, more instrumental than unconditional incentives, and for the workers who do not care about the charitable cause. These findings highlight some serious limitations of prosocial incentives: firms' perceived intentions and the pool of employees will be crucial for their effectiveness.
Market Competition and the Effectiveness of Performance Pay
Pooyan Khashabi et al.
Organization Science, forthcoming
Abstract:
It is well established that the effectiveness of pay-for-performance (PfP) schemes depends on employee- and organization-specific factors. However, less is known about the moderating role of external forces such as market competition. Our theory posits that competition generates two counteracting effects - the residual market and competitor response effects - that vary with competition and jointly generate a curvilinear relationship between PfP effectiveness and competition. Weak competition discourages effort response to PfP because there is little residual market to gain from rivals, whereas strong competition weakens incentives because an offsetting response from competitors becomes more likely. PfP hence has the strongest effect under moderate competition. Field data from a bakery chain and its competitive environment confirm our theory and let us refute several alternative interpretations.