aalto1 untyped-item.component.html
Incentives to innovate: Profit sharing and employee health and safety
Loading...
URL
Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.
Authors
Date
Department
Major/Subject
Mcode
Degree programme
Language
en
Pages
48 + 4
Series
Abstract
Corporate innovation has long been established as a key strategic factor to ensure economic growth and competitive advantage of firms. This novel study contributes to the underexamined fields of non-executive and non-monetary incentives to innovate. I empirically study the effect of profit sharing programs that are targeted to the majority of a firm’s employees on corporate innovation. In addition, I test how health and safety concerns in a firm impact its innovativeness. In my data, profit sharing program occurs in a firm when there is a clear link between the profit of the company and the employee compensation in a given period. Health and safety concerns covered in the dataset are, for instance, workplace accidents, injuries, and fatalities.
My final sample consists of 2,686 firm-years and involves U.S. firms jointly covered in the NBER Patent and Citation Database, MSCI ESG KLD STATS database and Compustat between 1995 and 2003. I assess the use of profit sharing and the occurrence of health and safety concerns with dummy variables. To measure corporate innovation, I follow earlier literature and use the numbers of patents, patent citations, and them scaled with R&D expenses. In addition, I include several control variables, including firm size, executive compensation and capital expenditures. As methodology, I use standard OLS regressions and negative binomial regressions.
This study shows support to the importance of non-executive and non-monetary innovation incentives. I find a positive and significant effect of profit sharing programs, and a negative and significant effect of health and safety concerns, on all the aforementioned innovation measures. However, I do not find significant results when running additional regressions with R&D expenses scaled by assets as innovation measure.
Furthermore, I find that the impacts of profit sharing and health and safety concerns on innovation are more pronounced in those firms, where the input of non-executive employees is stronger. However, I do not find any significant differences when testing whether the effects are larger in firms with less free-riding. I also examine closer how profit sharing affects innovation in firms where the use of profit sharing programs has changed, but I do not find that the firms would have been more innovative in those years when profit sharing was in use.