Too Much of a Good Thing? Administrative Support, Innovation, Employee Satisfaction, and Firm Performance

Abstract

Administrative support is instrumental in how firms support, manage, and motivate employees. Yet, our knowledge about this important human capital management factor is limited. Using novel data extracted from employees’ online profiles, we find that administrative intensity, defined as the proportion of employees in administrative support positions, is negatively associated with future firm performance. This negative association disappears when administrative intensity is low, which suggests that a certain level of administrative intensity may not be detrimental. In line with arguments that high administrative intensity may impede firm innovation, we find that firms with high administrative intensity have a lower quantity and lower quality of innovation output. On the benefit side, we find evidence suggesting that firms with high administrative intensity have better relationships with their employees. High administrative intensity is associated with higher employee job satisfaction and fewer employee separations. Finally, we find that firms with high administrative intensity have lower future stock returns, which suggests that investors do not fully utilize information on administrative intensity. Overall, our evidence suggests that administrative intensity is informative about firm–employee relationships, innovation, and firm performance.

Keywords: administrative support, innovation, employee satisfaction, employee job separations, human capital, firm performance, stock returns

JEL Classification: M40, M41