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Organizational capital and firm risk – Testing the outside option

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  • Cook, Douglas O.
  • Via, M. Tony

Abstract

We examine organizational capital risk on a micro level by identifying 120,017 quasi-voluntary inventor moves between firms over three decades. Consistent with survey results from Eisfeldt and Papanikolaou (2013), we find that a 10% increase in organizational capital results in a 1.8% greater annual exit of firm inventors. Exit risk is higher 1) where employees are more transferable between firms and 2) among financially constrained firms that cannot compensate valuable employees competitively. Valuations are lower for firms with greater levels of inventor turnover / outflows.

Suggested Citation

  • Cook, Douglas O. & Via, M. Tony, 2023. "Organizational capital and firm risk – Testing the outside option," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005232
    DOI: 10.1016/j.frl.2022.103344
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    References listed on IDEAS

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    More about this item

    Keywords

    Labor mobility; Organizational capital; Firm risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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