The Effect of Firm Compensation Structures on Employee Mobility and Employee Entrepreneurship of Extreme Employers
University of Illinois at Urbana-Champaign - Department of Business Administration
University of Maryland - Robert H. Smith School of Business
Benjamin A. Campbell
The Ohio State University - Fisher College of Business
University of Toronto - Rotman School of Management; University of Toronto at Scarborough - Division of Management
March 1, 2010
US Census Bureau Center for Economic Studies Paper No. CES-WP-10-06
Previous studies of employee entrepreneurship have not considered the rewards available to potential entrepreneurs inside of their current organizations. This study hopes to fill this gap by investigating how the firm’s compensation structure, an important strategic decision closely scrutinized by human resource management, affects the mobility and entrepreneurship decisions of its employees, particularly those employees at the extreme ends of the performance distribution. Using a comprehensive U.S. Census data set covering all employees in the legal services industry across ten states for fifteen years, we find that high performing employees are less likely to leave firms with highly dispersed compensation structures. However, if high performers do leave employers that offer highly disperse compensation structures, they are more likely to join new firms. Less talented employees, on the other hand, are more likely to leave firms with greater pay dispersion. Unlike high performers, we find that low performers are less likely to move to new ventures when departing firms with highly disperse compensation structures.
Number of Pages in PDF File: 42working papers series
Date posted: March 24, 2010
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