Reaching for the Stars: Who Pays for Talent in Innovative Industries?
Office of the Comptroller of the Currency (OCC)
Cornell University - Department of Economics; Cornell University - School of Industrial and Labor Relations
University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
American Institutes for Research; Institute for the Study of Labor (IZA)
Kathryn L. Shaw
Stanford Graduate School of Business; National Bureau of Economic Research (NBER)
The Economic Journal, Vol. 119, Issue 538, pp. F308-F332, June 2009
Innovative firms need to hire and motivate highly talented workers. This article connects the potential returns to innovation to the structure of compensation for skilled employees. We show that the software firms that operate in software sectors with high potential upside gains to innovation pay more to ‘star’ workers than do other firms that operate in stable markets. Firms operating in product domains with highly skewed positive returns pay employees more in up-front starting salaries and offer higher compensation growth. The large estimated effects on earnings are robust to the inclusion of a wide range of controls for worker and firm characteristics.
Number of Pages in PDF File: 25Accepted Paper Series
Date posted: May 27, 2009
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