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Economic and Non-Economic Incentives and the Source of Firm Competitive Advantage

17 October 2019 at 11:30 AM - 1:00 PM

Room 205b, Campus on Viale Romania, 32

Speaker: Eni Gambeta, Carl. H Lindner College of Business University of Cincinnati

Abstract:

Instrumental stakeholder theory proposes a utility-based approach whereby firmsincrease the utility, or satisfaction, of employees by sharing with them either economic or noneconomicvalue (as incentives), contributing to increased commitment and effort from employeestowards increasing firm competitive advantage. However, the question arises whether economicand non-economic incentives for employees leads to equifinal outcomes for the firms in the typeof competitive advantage it garners. This paper incorporates exchange theory insights withinstrumental stakeholder theory in proposing that these two types of incentives are notexchangeable and do not lead to similar advantages for firms; each one contributes either toefficiency-advantages or differentiation-advantages, but not the other. Furthermore, wedemonstrate that a combination of high employee satisfaction with both incentives types maylead to destructive, rather than additive, effects on firm competitive advantage, indicating thatunder certain circumstances increasing employee satisfaction may lead to adverse outcomes forthe firm. We test our arguments using a novel dataset of employee reviews of the firm’seconomic and non-economic incentives from Glassdoor using 201,619 reviews in 143 firms.