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Being too good for your own good: A stakeholder perspective on the differential effect of firm‐employee relationships on innovation search

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  • Eni Gambeta
  • Balaji R. Koka
  • Robert E. Hoskisson

Abstract

Research Summary: A firm's stakeholder orientation toward its employees is argued to be beneficial for firm outcomes. However, this orientation may also have disparate impacts on particular behaviors and outcomes, such as local versus distant search, which impose contradictory firm requirements. We find that while a strong firm–employee relationship leads to increasingly higher levels of local search (exploitation), it also leads to increasingly lower levels of distant search (exploration). In additional supplementary analyses, we find similar disparate effects on the productivity of innovation and its market value, as well as a moderating effect of the firm's relationship with other stakeholders which exacerbates both the positive and negative impacts of firm–employee relationships. We discuss the implications of these findings for both the innovation and the instrumental stakeholder literatures. Managerial Summary: Motivating employees toward generating new ideas and innovations is an important challenge for most firms. Establishing the firm as a trustful and good partner for employees may engender in them the commitment and willingness to invest in such activities. However, questions remain as to how “well” the firm should “treat” its employees, and the potential adverse consequences from over‐investing in such relationships. This paper examines these important practical questions and finds that establishing strong relationships with employees can be simultaneously beneficial and harmful for the firm depending on the type of new ideas it seeks. We find that such strong relationships helps with motivating employees to build on and perfect existing knowledge, but is harmful with respect to bringing in new and unfamiliar knowledge.

Suggested Citation

  • Eni Gambeta & Balaji R. Koka & Robert E. Hoskisson, 2019. "Being too good for your own good: A stakeholder perspective on the differential effect of firm‐employee relationships on innovation search," Strategic Management Journal, Wiley Blackwell, vol. 40(1), pages 108-126, January.
  • Handle: RePEc:bla:stratm:v:40:y:2019:i:1:p:108-126
    DOI: 10.1002/smj.2967
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    Cited by:

    1. Wang, Jiaxin & Huang, Hongyan & Huang, Xiang & Sun, Di & Song, Zilong, 2024. "Returning from overseas: STEMs migration and corporate digitalization," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. David Weitzner & Yuval Deutsch, 2023. "Harm Reduction, Solidarity, and Social Mobility as Target Functions: A Rortian Approach to Stakeholder Theory," Journal of Business Ethics, Springer, vol. 186(3), pages 479-492, September.
    3. Chowdhury, Rajib & Doukas, John A. & Park, Jong Chool, 2021. "Stakeholder orientation and the value of cash holdings: Evidence from a natural experiment," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. Ko, Young Jin & O'Neill, Hugh & Xie, Xuanli, 2021. "Strategic intent as a contingency of the relationship between external knowledge and firm innovation," Technovation, Elsevier, vol. 104(C).
    5. Li Yu & Weiwei Wu, 2024. "The impact of perceived environmental corporate social responsibility on idea generation and idea implementation," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    6. Maria Jose Murcia, 2021. "Progressive and Rational CSR as Catalysts of New Product Introductions," Journal of Business Ethics, Springer, vol. 174(3), pages 613-627, December.
    7. Iurkov, Viacheslav & Koval, Mariia & Misra, Shekhar & Pedada, Kiran & Sinha, Ashish, 2024. "Impact of ESG distinctiveness in alliances on shareholder value," Journal of Business Research, Elsevier, vol. 171(C).
    8. Ithai Stern & Xin Deng & Guoli Chen & Huasheng Gao, 2021. "The “butterfly effect” in strategic human capital: Mitigating the endogeneity concern about the relationship between turnover and performance," Strategic Management Journal, Wiley Blackwell, vol. 42(13), pages 2493-2510, December.
    9. André Laplume & Kent Walker & Zhou Zhang & Xin Yu, 2021. "Incumbent Stakeholder Management Performance and New Entry," Journal of Business Ethics, Springer, vol. 174(3), pages 629-644, December.
    10. Potdar, Balkrushna & Garry, Tony & McNeill, Lisa & Gnoth, Juergen & Pandey, Rakesh & Mansi, Mansi & Guthrie, John, 2020. "Retail employee guardianship behaviour: A phenomenological investigation," Journal of Retailing and Consumer Services, Elsevier, vol. 54(C).
    11. Martin R. W. Hiebl & David I. Pielsticker, 2023. "Automation, organizational ambidexterity and the stability of employee relations: new tensions arising between corporate entrepreneurship, innovation management and stakeholder management," The Journal of Technology Transfer, Springer, vol. 48(6), pages 1978-2006, December.
    12. Conti, Raffaele & Novelli, Elena, 2022. "Not all technologies are created equal for stakeholders: Constituency statutes, firm stakeholder orientation and investments in technology generality," Research Policy, Elsevier, vol. 51(3).
    13. Linda Argote & Sunkee Lee & Jisoo Park, 2021. "Organizational Learning Processes and Outcomes: Major Findings and Future Research Directions," Management Science, INFORMS, vol. 67(9), pages 5399-5429, September.
    14. Sasanka Sekhar Chanda & Bill McKelvey, 2020. "Back to the basics: reconciling the continuum and orthogonal conceptions of exploration and exploitation," Computational and Mathematical Organization Theory, Springer, vol. 26(2), pages 175-206, June.

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