Employee Incentives to Make Firm-Specific Investments: Implications for Resource-Based Theories of Corporate Diversification

By Heli Wang, Jay B. Barney. 2006

190 citations recorded by the source corpus.

We argue that the risk associated with the value of a firm's core resources has an impact on employee decisions to make firm-specific investments, independent of the threat of opportunism that might exist in a particular exchange. We further explore mechanisms firms may adopt to mitigate the employee incentive problem stemming from the risk associated with core resource value. These arguments shed new light on resource-based theories of corporate diversification.

Subfields: Accounting, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/d303f4fe05c69b56ab4bcff1dde65538ef13b3e7

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Economics and Econometrics

In Sociology and Political Science

Citations in the corpus

Complementarity in Monitoring and Bonding: More Intense Monitoring Leads to Higher Executive Compensation (2009, background): “Such firm-specific investment is critical for firms intent on innovating and establishing competitive resources (Wang & Barney, 2006).”
Do Effectuation Processes Shape the Relationship between Product Diversification and Performance in New Ventures? (2017, background): “Instead, reducing the risk by exploring the applicability of the venture’s resources in other product markets (Markides & Williamson, 1994; Silverman, 1999; Wang & Barney, 2006) while keeping immediate financial control (Chang & Wang, 2007) may facilitate successful diversification.”
Who is in charge? A property rights perspective on stakeholder governance (2012, unknown): “Agents with foresight make such investments in expectation of reasonable returns and based on appropriate safeguards (McGahan, 1997; Wang and Barney 2006; Wang et al., 2009).”
Micro-Foundations of Firm-Specific Human Capital: When Do Employees Perceive Their Skills to be Firm-Specific? (2016, unknown): “These feelings are anticipated in the literature as reasons why workers are reluctant to invest in FSHC (Wang et al., 2009; Wang & Barney, 2006; Wang & Lim, 2008).”
Ownership as a Form of Corporate Governance (2010, unknown): “Understanding the appropriation process is critical for any property rights system because without trust in the appropriation process, not only do markets break down but managers and employees are unwilling to make firm specific investments that are the basis for value creation (Wang and Barney, 200”
Toward a More Comprehensive Model of Firms’ Human Capital Rents (2017, background): “Thus, a recurring theme in SHC research is how firms can induce workers to develop the firm-specific skills desired by employers in the the face of potential employer opportunism (e.g., Wang & Barney, 2006; Wang et al., 2009).”
The Resource-Based View of the Firm, Human Resources, and Human Capital: Progress and Prospects (2021, background): “This is a major focus of the strategy literature in studying FSHC (Wang & Barney, 2006; Wang, He, & Mahoney, 2009).”
Microfoundations for Strategy: A Goal-Framing Perspective on the Drivers of Value Creation (2013, background): “Specifically, such research either starts from purely cognitive foundations (Gavetti, 2005; Teece, 2007; Powell, Lovallo & Fox, 2011: 1370) or from purely motivational foundations (e.g., Abell, Felin, & Foss, 2008; 3 Gottschalg & Zollo, 2007; Wang & Barney, 2008; Nickerson & Zenger, 2008).”
Strategic Human Capital (2014, background): “Accordingly, the potential holdup hazard if the firm fails to compensate employees for investments in firm-specific human capital has been emphasized as a critical problem in generating a competitive advantage from human capital (Wang & Barney, 2006; Wang, He, & Mahoney, 2009).”
Slack Resources and the Rent-Generating Potential of Firm-Specific Knowledge (2016, result): “By doing so, this study, along with some other recent studies in related fields (Gottschalg & Zollo, 2007; Wang & Barney, 2006; Wang et al., 2009), helps advance the resource-based view of the firm and develop a more comprehensive theory of the sustainability of competitive advantage.”
Resource-Based Theory and Corporate Diversification (2011, background): “At the same time, recent theoretical advances in RBT indicate that exploring the intersection between RBT and organizational economics holds great promise (e.g., Wang & Barney, 2006).”
Human capital matters: Market valuation of firm investments in training and the role of complementary assets (2017, unknown): “Mgmt. J., 38: 1895–1914 (2017) DOI: 10.1002/smj Mahoney & Kor, 2015; Wang & Barney, 2006).”
Do Shareholders or Stakeholders Appropriate the Rents from Corporate Diversification? The Influence of Ownership Structure (2010, background): “The value created from diversification does not just flow to a firm’s relational and transactional owners, as other stakeholders, such as the employees and executives of the firm, can also appropriate it (Amihud & Lev, 1981; Wang & Barney, 2006).”