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The Effect of Firm Compensation Structures on Employee Mobility and Employee Entrepreneurship of Extreme Performers

Author

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  • Seth Carnahan
  • Rajshree Agarwal
  • Benjamin Campbell
  • April Franco

Abstract

Previous studies of employee entrepreneurship have not considered the rewards available to potential entrepreneurs inside of their current organizations. This study hopes to fill this gap by investigating how the firm�s compensation structure, an important strategic decision closely scrutinized by human resource management, affects the mobility and entrepreneurship decisions of its employees, particularly those employees at the extreme ends of the performance distribution. Using a comprehensive U.S. Census data set covering all employees in the legal services industry across ten states for fifteen years, we find that high performing employees are less likely to leave firms with highly dispersed compensation structures. However, if high performers do leave employers that offer highly disperse compensation structures, they are more likely to join new firms. Less talented employees, on the other hand, are more likely to leave firms with greater pay dispersion. Unlike high performers, we find that low performers are less likely to move to new ventures when departing firms with highly disperse compensation structures.

Suggested Citation

  • Seth Carnahan & Rajshree Agarwal & Benjamin Campbell & April Franco, 2010. "The Effect of Firm Compensation Structures on Employee Mobility and Employee Entrepreneurship of Extreme Performers," Working Papers 10-06, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:10-06
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    File URL: https://www2.census.gov/ces/wp/2010/CES-WP-10-06.pdf
    File Function: First version, 2010
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    Cited by:

    1. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "Reprint of The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(8).
    2. Cui, Victor & Ding, Waverly W. & Yanadori, Yoshio, 2011. "Compensation Structure and the Creation of Exploratory Knowledge in Technology Firms," Institute for Research on Labor and Employment, Working Paper Series qt4f7671kn, Institute of Industrial Relations, UC Berkeley.
    3. Ligorio, Lorenzo & Venturelli, Andrea & Caputo, Fabio, 2022. "Tracing the boundaries between sustainable cities and cities for sustainable development. An LDA analysis of management studies," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    4. Eva Crespo-Cebada & Carlos Díaz-Caro & Aurora E. Rabazo-Martín & Edilberto J. Rodríguez-Rivero, 2021. "Do Narcissistic Managers Prefer Incentive Systems Based on Financial Instruments? An Analysis Based on Choice Experiments," Sustainability, MDPI, vol. 13(3), pages 1-13, January.
    5. Changhee Yoon & Seungyeon Moon & Heesang Lee, 2022. "Symbiotic Relationships in Business Ecosystem: A Systematic Literature Review," Sustainability, MDPI, vol. 14(4), pages 1-15, February.
    6. Bhaskar, Ratikant & Bansal, Shashank & Abbassi, Wajih & Pandey, Dharen Kumar, 2023. "CEO compensation and CSR: Economic implications and policy recommendations," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 232-256.
    7. Daniel H. Weinberg, 2013. "Talent Recruitment and Firm Performance: The Business of Major League Sports," Working Papers 13-54, Center for Economic Studies, U.S. Census Bureau, revised Feb 2014.
    8. Robert P. Garrett & Chao Miao & Shanshan Qian & Tae Jun Bae, 2017. "Entrepreneurial spawning and knowledge-based perspective: a meta-analysis," Small Business Economics, Springer, vol. 49(2), pages 355-378, August.
    9. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(3).
    10. Okpalaoka, Chijindu Iheanacho, 2023. "Research on the digital economy: Developing trends and future directions," Technological Forecasting and Social Change, Elsevier, vol. 193(C).
    11. Elisabete Nogueira & Sofia Gomes & João M. Lopes, 2024. "Financial Sustainability: Exploring the Influence of the Triple Bottom Line Economic Dimension on Firm Performance," Sustainability, MDPI, vol. 16(15), pages 1-17, July.

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