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That is what friends do: employee friendliness and innovation

Author

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  • Adhikari, Hari P.
  • Choi, Wonseok
  • Sah, Nilesh B.

Abstract

Recent literature suggests that labor related issues can impact corporate innovation. In this study we hypothesize and find that firms with congenial work environments innovate more and have greater innovative efficiency. Our results also suggest that cash profit sharing and employee involvement have a positive bearing whereas union relationships have a negative impact on innovation output of a firm. In addition, subsample analysis reveals that employee-friendly policies are more important in industries having higher employee power. Our results are consistent with the logic that happy and satisfied employees tend to be more productive than the unhappy and dissatisfied ones. Our work suggests a channel through which satisfied employees contribute towards increasing firm value − by increasing the innovation productivity and efficiency of the firm. So, firms must make continued efforts towards creating and maintaining a friendly work environment.

Suggested Citation

  • Adhikari, Hari P. & Choi, Wonseok & Sah, Nilesh B., 2017. "That is what friends do: employee friendliness and innovation," Journal of Economics and Business, Elsevier, vol. 90(C), pages 65-76.
    • Handle: RePEc:eee:jebusi:v:90:y:2017:i:c:p:65-76
    DOI: 10.1016/j.jeconbus.2016.10.004
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    More about this item

    Keywords

    Innovation; Corporate environment; Employee friendliness; Labor productivity;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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