Employee-Based Innovation in Organizations: Overcoming Strategic Risks from Opportunism and Governance

Strategic Entrepreneurship Journal, Forthcoming

40 Pages Posted: 7 Apr 2017

See all articles by Gurupdesh S. Pandher

Gurupdesh S. Pandher

University of Windsor, Odette School of Business

Gulseren Mutlu

City University of Hong Kong, Department of Economics & Finance

Al-Karim Samnani

University of Windsor

Date Written: December 15, 2016

Abstract

Employees performing everyday tasks frequently acquire valuable new ideas and knowledge. Our formal analysis studies how organizations can benefit from employee-driven innovation by using incentives to overcome strategic risk from opportunism and governance. We use a game theory framework to analyze the strategic interactions involved and identify incentives under which valuable ideas will be revealed without appropriation (in equilibrium). Our analysis considers both the short-run and the long-run where governance can be adjusted to maximize expected future innovation profits. Innovation value, frequency, governance quality, and employee contestation costs are shown to play a salient role in determining the innovation incentives and equilibrium. Overall, our analysis and results provide a number of insights on how organizations can overcome frictions from strategic innovation risks to more fully mobilize their innovation potential and knowledge-based resources.

Keywords: employee-based innovation, 'soft innovations', opportunism, governance risk, knowledge-based view, transaction cost economics

JEL Classification: L26, D23, L32

Suggested Citation

Pandher, Gurupdesh S. and Mutlu, Gulseren and Samnani, Al-Karim, Employee-Based Innovation in Organizations: Overcoming Strategic Risks from Opportunism and Governance (December 15, 2016). Strategic Entrepreneurship Journal, Forthcoming , Available at SSRN: https://ssrn.com/abstract=2947743

Gurupdesh S. Pandher (Contact Author)

University of Windsor, Odette School of Business ( email )

401 Sunset Avenue
Windsor, Ontario N9B 3P4
Canada
519-253-3000 ext 3091 (Phone)

HOME PAGE: http://www1.uwindsor.ca/odette/gurupdesh-pandher

Gulseren Mutlu

City University of Hong Kong, Department of Economics & Finance ( email )

Kowloon Tong
Hong Kong

Al-Karim Samnani

University of Windsor ( email )

401 Sunset Avenue
Windsor, Ontario N9B 3P4
Canada

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