IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v25y2016i3p608-626.html
   My bibliography  Save this article

Task‐Specific Human Capital and Organizational Inertia

Author

Listed:
  • Josse Delfgaauw
  • Otto H. Swank

Abstract

Employees' incentive to invest in their task proficiency depends on the likelihood that they will execute the same tasks in the future. Changes in tasks can be warranted as a result of technological progress and changes in firm strategy as well as from fine‐tuning job design and from monitoring individuals' performance. However, the possibility of a change in tasks reduces employees' incentive to invest in task‐specific skills. We develop a simple two‐period principal–agent model showing that some degree of inertia benefits the principal. We then analyze how organizations can optimally combine several policies to approach the optimal degree of inertia. In particular, we consider the optimal mixture of (abstaining from) exploration, managerial vision, organizational task‐specific investments, and incentive pay. Our analysis yields testable predictions concerning the relations between these organizational policies.

Suggested Citation

  • Josse Delfgaauw & Otto H. Swank, 2016. "Task‐Specific Human Capital and Organizational Inertia," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 608-626, September.
    • Handle: RePEc:bla:jemstr:v:25:y:2016:i:3:p:608-626
    DOI: 10.1111/jems.12142
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jems.12142
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jems.12142?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. James G. March, 1991. "Exploration and Exploitation in Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 71-87, February.
    3. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    4. Glenn B. Voss & Zannie Giraud Voss, 2013. "Strategic Ambidexterity in Small and Medium-Sized Enterprises: Implementing Exploration and Exploitation in Product and Market Domains," Organization Science, INFORMS, vol. 24(5), pages 1459-1477, October.
    5. Martin Ruef, 1997. "Assessing organizational fitness on a dynamic landscape: an empirical test of the relative inertia thesis," Strategic Management Journal, Wiley Blackwell, vol. 18(11), pages 837-853, December.
    6. Raghu Garud & Arun Kumaraswamy & Peter Karnøe, 2010. "Path Dependence or Path Creation?," Journal of Management Studies, Wiley Blackwell, vol. 47(4), pages 760-774, June.
    7. Burgelman, Robert A., 2002. "Strategy as Vector and the Inertia of Co-evolutionary Lock-in," Research Papers 1745, Stanford University, Graduate School of Business.
    8. Suman Ghosh & Michael Waldman, 2010. "Standard promotion practices versus up‐or‐out contracts," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 301-325, June.
    9. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    10. Christina Gathmann & Uta Schönberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, January.
    11. Wouter Dessein & Tano Santos, 2006. "Adaptive Organizations," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 956-985, October.
    12. Eric Van den Steen, 2005. "Organizational Beliefs and Managerial Vision," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(1), pages 256-283, April.
    13. Rodolphe Durand & Jean-Philippe Vergne, 2011. "The Path of Most Persistence: An Evolutionary Perspective on Path Dependence and Dynamic Capabilities," Post-Print hal-00583118, HAL.
    14. Canice Prendergast, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 523-534.
    15. Daniel Ferreira & Marcelo Rezende, 2007. "Corporate strategy and information disclosure," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 164-184, March.
    16. Julio Rotemberg & Garth Saloner, 2000. "Visionaries, Managers, and Strategic Direction," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 693-716, Winter.
    17. Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984-2000," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 387-420, July.
    18. Kahn, Charles & Huberman, Gur, 1988. "Two-sided Uncertainty and "Up-or-Out" Contracts," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 423-444, October.
    19. Sebastian Raisch & Julian Birkinshaw & Gilbert Probst & Michael L. Tushman, 2009. "Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance," Organization Science, INFORMS, vol. 20(4), pages 685-695, August.
    20. Boyer, Marcel & Robert, Jacques, 2006. "Organizational inertia and dynamic incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 324-348, March.
    21. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
    22. Juha Uotila & Markku Maula & Thomas Keil & Shaker A. Zahra, 2009. "Exploration, exploitation, and financial performance: analysis of S&P 500 corporations," Strategic Management Journal, Wiley Blackwell, vol. 30(2), pages 221-231, February.
    23. Boyan Jovanovic & Yaw Nyarko, 1995. "A Bayesian Learning Model Fitted to a Variety of Empirical Learning Curves," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995 Micr), pages 247-305.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    2. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    3. Manuel Guisado-González & Jennifer González-Blanco & José Luis Coca-Pérez, 2019. "Exploration, exploitation, and firm age in alliance portfolios," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 387-406, December.
    4. Úbeda-García, Mercedes & Claver-Cortés, Enrique & Marco-Lajara, Bartolomé & Zaragoza-Sáez, Patrocinio, 2020. "Toward a dynamic construction of organizational ambidexterity: Exploring the synergies between structural differentiation, organizational context, and interorganizational relations," Journal of Business Research, Elsevier, vol. 112(C), pages 363-372.
    5. Eric Van den Steen, 2017. "A Formal Theory of Strategy," Management Science, INFORMS, vol. 63(8), pages 2616-2636, August.
    6. Jäger, Simon & Heining, Jörg, 2019. "How Substitutable Are Workers? Evidence from Worker Deaths," MPRA Paper 109757, University Library of Munich, Germany, revised 01 Jan 2019.
    7. Marina Estrada-Cruz & Noelia Rodriguez-Hernández & Antonio J. Verdú-Jover & Jose Maria Gómez-Gras, 2022. "The effect of competitive intensity on the relationship between strategic entrepreneurship and organizational results," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 1-24, March.
    8. Ljubica Nedelkoska & Frank Neffke, 2019. "Skill Mismatch and Skill Transferability: Review of Concepts and Measurements," Papers in Evolutionary Economic Geography (PEEG) 1921, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2019.
    9. Lee, Jeoung Yul & Yang, Young Soo & Park, Byung Il, 2020. "Interplay between dual dimensions of knowledge sharing within globalized chaebols: The moderating effects of organization size and global environmental munificence," International Business Review, Elsevier, vol. 29(6).
    10. Jingoo Kang & Sang‐Joon Kim, 2020. "Performance implications of incremental transition and discontinuous jump between exploration and exploitation," Strategic Management Journal, Wiley Blackwell, vol. 41(6), pages 1083-1111, June.
    11. Marina Estrada-Cruz & Noelia Rodriguez-Hernández & Antonio J. Verdú-Jover & Jose Maria Gómez-Gras, 0. "The effect of competitive intensity on the relationship between strategic entrepreneurship and organizational results," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-24.
    12. Armin Anzenbacher & Marcus Wagner, 2020. "The role of exploration and exploitation for innovation success: effects of business models on organizational ambidexterity in the semiconductor industry," International Entrepreneurship and Management Journal, Springer, vol. 16(2), pages 571-594, June.
    13. Sunkee Lee & Philipp Meyer-Doyle, 2017. "How Performance Incentives Shape Individual Exploration and Exploitation: Evidence from Microdata," Organization Science, INFORMS, vol. 28(1), pages 19-38, February.
    14. Yury Dranev & Alisa Izosimova & Dirk Meissner, 2020. "Organizational Ambidexterity and Performance: Assessment Approaches and Empirical Evidence," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(2), pages 676-691, June.
    15. Teece, David J., 2010. "Technological Innovation and the Theory of the Firm," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 679-730, Elsevier.
    16. Steffen Merkel & Sascha L. Schmidt & Benno Torgler, 2017. "The effect of individual uncertainty on the specificity of human capital: empirical evidence from career developments in professional soccer," Applied Economics, Taylor & Francis Journals, vol. 49(21), pages 2083-2095, May.
    17. Mavroudi, Eva & Kesidou, Effie & Pandza, Krsto, 2020. "Shifting back and forth: How does the temporal cycling between exploratory and exploitative R&D influence firm performance?," Journal of Business Research, Elsevier, vol. 110(C), pages 386-396.
    18. Bonesso, Sara & Gerli, Fabrizio & Scapolan, Annachiara, 2014. "The individual side of ambidexterity: Do individuals’ perceptions match actual behaviors in reconciling the exploration and exploitation trade-off?," European Management Journal, Elsevier, vol. 32(3), pages 392-405.
    19. Carolina Rojas-Córdova & Amanda J. Williamson & Julio A. Pertuze & Gustavo Calvo, 2023. "Why one strategy does not fit all: a systematic review on exploration–exploitation in different organizational archetypes," Review of Managerial Science, Springer, vol. 17(7), pages 2251-2295, October.
    20. Daniel Ferreira & Thomas Kittsteiner, 2016. "When Does Competition Foster Commitment?," Management Science, INFORMS, vol. 62(11), pages 3199-3212, November.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:25:y:2016:i:3:p:608-626. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.