Employee Disputes and Innovation Performance: Evidence from Pharmaceutical Industry

Networks Financial Institute Working Paper Series 2019-WP-01

62 Pages Posted: 2 Aug 2019

See all articles by Blake Rayfield

Blake Rayfield

Indiana State University - Scott College of Business; Networks Financial Institute

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

Date Written: July 30, 2019

Abstract

In this study, we use a hand-collected dataset of employee lawsuits to understand the effect of employee allegations on firms’ innovation in a human capital-intensive industry. We gather more than 2,293 employee disputes between 2000 and 2015 and test the relationship between employee lawsuits and Food and Drug Administration (FDA) product approvals in the pharmaceutical industry. We find that employee disputes lower the total number of FDA-approved products. We document that firms with frequent employee allegations maintain low innovation outcomes. Additional results show that case characteristics are an important determinant of FDA approvals; labor unions and case duration delay time-to-approval of submitted products, which may explain the deteriorated innovation outcomes. Overall, our findings highlight the importance of employee treatment in the workplace environment, which is ultimately related to firms’ innovation performance.

Keywords: Institutional Investors, Labor Relations, Innovation

JEL Classification: G30, G39, G23, O32

Suggested Citation

Rayfield, Blake and Unsal, Omer, Employee Disputes and Innovation Performance: Evidence from Pharmaceutical Industry (July 30, 2019). Networks Financial Institute Working Paper Series 2019-WP-01, Available at SSRN: https://ssrn.com/abstract=3429189

Blake Rayfield (Contact Author)

Indiana State University - Scott College of Business ( email )

800 Sycamore Street
Terre Haute, IN 47809
United States

Networks Financial Institute ( email )

Indianapolis, 46208
United States

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

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