Jed Devaro | California State University, East Bay (original) (raw)

Papers by Jed Devaro

Strategic Management Journal, 2006

In this analysis I study promotion schemes as human resource management strategies by which the f... more In this analysis I study promotion schemes as human resource management strategies by which the firm can realize strategic goals by motivating workers to higher levels of effort and performance. Using information on promotions, wages, and performance for professional workers in a cross section of establishments in four metropolitan areas of the U.S., I investigate empirically the proposition that firms strategically organize promotion tournaments to motivate workers to higher levels of performance. I present evidence suggesting that relative performance of workers determines promotions, supporting the notion of internal promotion competitions in which internal hiring policies and fixed job slots combine to create competitions among workers of a given rank in a firm. I then estimate a structural model of promotion tournaments that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the prediction of tournament theory that workers are motivated by larger spreads. * I have benefited considerably from discussions of this work with numerous colleagues. The comments of Chris Collins, Daniel Simon, the editor, and an anonymous referee were particularly helpful. David Rosenblum provided outstanding research assistance.

Labour Economics, Dec 1, 2011

We study the effect of product market volatility on a firm's choice between multiskilling and spe... more We study the effect of product market volatility on a firm's choice between multiskilling and specialization. We construct a theoretical model that captures the tradeoff between multiskilling (which gives greater flexibility to reassign workers in production) and specialization (which provides workers with the expertise to respond to product market signals in their area of specialty). Using data from the 2004 WERS, a nationally-representative cross section of British establishments, we find that greater volatility is associated with greater specialization. This result holds both inside and outside of manufacturing, but consistent with our model, it holds only in multi-product establishments and not in single-product ones.

The Journal of Law, Economics, and Organization, 2019

A model of employer learning (both symmetric and asymmetric) about worker ability from job histor... more A model of employer learning (both symmetric and asymmetric) about worker ability from job histories is constructed, and testable implications are derived to detect asymmetric learning empirically. The model predicts that early-career bad job matches are particularly damaging when learning is asymmetric. Analysis of NLSY79 data reveals that job hopping is associated with lower wages for college graduates, controlling for measured ability, labor market experience, and current job tenure. Suggestive of asymmetric learning, the effect is strongest for job tenures less than one year and for early-career workers, and mitigated when job hopping severs matches that were formed during economic downturns. (JEL D82, J31, J63)

Industrial Relations: A Journal of Economy and Society

Incumbents in electoral regimes often retain power despite having to regularly compete in multipa... more Incumbents in electoral regimes often retain power despite having to regularly compete in multiparty elections. We examine a specific channel through which incumbents can seek to prevent the emergence of a strong opposition that might threaten them in future elections. We present a formal model demonstrating that incumbents can strategically induce opposition fragmentation by appointing some opposition members to ministerial cabinet positions. Opposition politicians who have the opportunity to secure a cabinet position in an incumbent's government tend to compete for office independently rather than coalescing into broad-based parties or electoral alliances. The model shows that weaker incumbents are more likely to rely on this cooptation strategy. Using original data on presidential elections across African countries in 1990-2016, we show that past cooptation of opposition politicians is associated with a more fragmented opposition field in subsequent elections.

Standard agency theories predict a positive relationship between incentive pay and the degree to ... more Standard agency theories predict a positive relationship between incentive pay and the degree to which workers have authority over how they do their jobs (e.g. which projects to select). With stronger incentives, when selecting projects, agents place relatively more weight on the monetary returns to a given project, and less weight on their own private beneflt (i.e. utility) from the project. This paper, in contrast, suggests that when projects have a positive risk-return tradeofi and the agent is more risk averse than the principal, delegation of authority could imply weaker incentives. Weaker incentives reduce an agent’s exposure to risk, leading to higher-return projects being selected. This creates a tension between inducing project selection (exploration) and inducing efiort (exploitation). When exploration is more valuable to the principal than exploitation, delegation and incentives are negatively related. We empirically test these predictions using data from a large cross se...

Strategic Compensation and Talent Management, 2020

SSRN Electronic Journal, 2017

In a multitask, market-based promotion tournament model, under different environments concerning ... more In a multitask, market-based promotion tournament model, under different environments concerning employer learning about worker ability, it is shown that: (a) asymmetric learning in multitask jobs is a necessary condition for "strategic shirking" (i.e., underperforming on certain tasks to increase the promotion probability); (b) when learning becomes increasingly symmetric on one task, the effort allocated to that task could increase or decrease, but effort on the other task increases; (c) strategic shirking does not occur in equilibrium in single-task models; and (d) promotions signal worker ability even when there is symmetric learning on one task, if learning is asymmetric on another. 1 | INTRODUCTION Ambitious, career-conscious workers are ever alert to ways they can outshine their peers in promotion contests. Talent and hard work are well-known ingredients for success, but their roles in determining promotions complexify when jobs are comprised of multiple tasks, as is usually the case in organizations. For example, police officers engage in primary tasks (e.g., making traffic stops, and pursuing and apprehending suspects) and, to a lesser extent, in managerial and leadership tasks, and public speaking. For police chiefs, however, the relative emphases placed on those activities are reversed. Similarly, school teachers are primarily engaged with educating students, whereas managerial and leadership activities (beyond the classroom setting) are not central to their job. For the school principals who supervise them, however, the relative emphases on those tasks are reversed. In both settings, the police officers and teachers who do stellar work on their primary tasks might actually be denied promotions because they are deemed indispensable in their current jobs, relative to their coworkers. A better strategy for achieving promotion to police chief, or to principal, might be to purposely underperform (or "strategically shirk") on the primary tasks while overperforming on the leadership tasks that are emphasized in the managerial job. 1 Strategic shirking is a fundamental incentive problem arising in multitask promotion tournaments, but it has only been analyzed in "classic" settings in which the employer precommits to the wages paid to promoted and nonpromoted workers to elicit desired worker behavior (e.g., effort choices) without direct influence from an outside market of competing firms. The goal of this study is to analyze the problem in "market-based" settings in which wages are determined by the bids of competing firms, as in Waldman (1984). This contribution in a multitask setting parallels recent developments in the (single-task) tournament literature. The bulk of that literature, starting with Lazear and Rosen (1981), concerns "classic tournaments" in which the employer can precommit to the prize structure. Recently, a

ILR Review, 2016

Using panel data from 2004 and 2011, the authors find an elevated incidence of work-related ailme... more Using panel data from 2004 and 2011, the authors find an elevated incidence of work-related ailments (associated with bones, muscles, and joints) in U.K. establishments that use individual performance pay, even after accounting for establishment fixed effects. Fixed-effect estimates also confirm a positive relationship between absence due to illness and performance pay. The elevated rates of ailments associated with performance pay appear to reduce financial performance and product quality, even though performance pay has a positive net influence on financial performance. Thus, a hidden cost of performance pay is occupational health deterioration. Parallel results are absent for labor productivity and, in a smaller sample, for profit.

SSRN Electronic Journal, 2015

We develop a theoretical model in which workers derive intrinsic motivation from their nonprofit ... more We develop a theoretical model in which workers derive intrinsic motivation from their nonprofit employer's social mission. We use it to explain: a) differences between nonprofits and for-profits in wages, incentive pay, training, fringe benefits, and recruitment, and b) the mixed empirical evidence concerning the sign of the nonprofit compensating wage differential. We use a unique dataset of California establishments to provide new evidence on sectorial differences in pay and HRM systems, interpreting these differences in light of the theoretical model. We find a greater incidence of training and benefits in nonprofits, and higher wages and incentive pay in for-profits.

SSRN Electronic Journal, 2012

We provide a theoretical analysis of promotion tournaments in which workers "strategically shirk"... more We provide a theoretical analysis of promotion tournaments in which workers "strategically shirk" by purposely under-performing on tasks that are de-emphasized in a promotion rule, while over-performing in tasks that are emphasized in the rule, thereby increasing their chances of promotion and a wage increase. To mitigate the multitasking problem, the …rm might commit upfront to a promotion rule that requires more balance in the performances across tasks in a job than would otherwise be justi…ed on productivity grounds. The analysis shows how "Putt's Law" (which states that competent workers are sometimes passed over for promotion in favor of incompetent ones) can be understood as a natural consequence of the …rm designing optimal promotion rules.

Strategic Organization, 2011

Theorizing in strategic organization often leads researchers to state hypotheses involving mediat... more Theorizing in strategic organization often leads researchers to state hypotheses involving mediating effects, in which an antecedent variable, X, affects an outcome, Y, through the intermediate channel of a mediator, M (Whetten, 1989). Sometimes the entire effect of X on Y is thought to operate through M (i.e. complete mediation), and sometimes X is thought to affect Y directly and also indirectly through M (i.e. partial mediation). When empirical researchers set out to test such mediating hypotheses the vast majority of tests use either of two standard methodologies introduced in the mid-1980s. The first is the 'causal steps' approach of Baron and Kenny (1986), extended in Kenny et al. (1998) and further discussed in MacKinnon et al. (2002) and Shrout and Bolger (2002). The second is the SEM approach, advocated in James and Brett (1984) and further discussed in James et al. (2006). While the two standard methods and their variants feature an appealing simplicity that has sustained their popularity for decades, they both require a stringent assumption that is unlikely to hold in most contexts of interest in strategic organization research. The result has been a proliferation of studies reporting problematic tests of mediating effects. 1 The good news is that better, instrument-based mediation tests such as two-stage least squares (2SLS) and three-stage least squares (3SLS) that do not require the stringent assumptions underlying the standard methods are available and have been well known for decades. The bad news is that they are rarely used, despite some clear and compelling articulations of their merits (e.g. Shaver, 2005). Some have recently argued that research in strategic organization would benefit from adopting these alternative methods given that they do not require the stringent assumptions of the standard methods (DeVaro, 2011; Shaver, 2005; Wood et al., 2008). The key point is not that evidence of mediating effects is more or less likely to be uncovered using the alternative methods versus the standard methods but rather that the standard methods are more likely to support incorrect conclusions regarding mediation. This essay offers a program for mediation remediation in the field of strategic organization and complements earlier papers that emphasized the importance of endogeneity and of correct interpretation of regressions in strategic organization research (e.g. Bascle, 2008; Hamilton and Nickerson, 2003; Yip and Tsang, 2007). It also provides a useful addition to the 'hallmarks of high-quality empirical research' identified in Oxley et al. (2010). But the call to replace the standard methods with instrument-based ones is not new. Given that the most important arguments for instrument-based methods have been made cogently beforewithout appreciably shifting the literature away from the standard methods-it is fair to ask what value there is in yet another orator ascending the soapbox to critique the standard methods. My answer is to focus this essay on what I see as the main reasons why scholars resist moving beyond 26357S OQ9410.1177/1476127011426357DeVaroStrategic Organization

Strategic Management Journal, 2006

[Excerpt] In this analysis I study promotion schemes as human resource management strategies by w... more [Excerpt] In this analysis I study promotion schemes as human resource management strategies by which the firm can realize strategic goals by motivating workers to higher levels of effort and performance. Using information on promotions, wages, and performance for professional workers in a cross section of establishments in four metropolitan areas of the U.S., I investigate empirically the proposition that firms strategically organize promotion tournaments to motivate workers to higher levels of performance. I present evidence suggesting that relative performance of workers determines promotions, supporting the notion of internal promotion competitions in which internal hiring policies and fixed job slots combine to create competitions among workers of a given rank in a firm. I then estimate a structural model of promotion tournaments that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the prediction of tournament theory that workers are motivated by larger spreads.

Southern Economic Journal, 1986

The RAND Journal of Economics, 2006

I propose a structural model of promotion tournaments and estimate it on a sample of professional... more I propose a structural model of promotion tournaments and estimate it on a sample of professional workers in a cross section of firms. I find strong evidence that relative performance of workers, as opposed to absolute performance, determines promotions. However, the data do not support the predictions of tournament theory that worker performance is increasing in the wage spreads from promotions and that firms optimally set wage spreads to induce higher levels of performance. The findings are suggestive of internal promotion competitions and fixed job slots as the average tendency describing promotion decisions in firms. JEL Classification: M51

Industrial Relations, 2006

I estimate a structural model of teams, autonomy, and financial performance, using a large cross ... more I estimate a structural model of teams, autonomy, and financial performance, using a large cross section of British establishments. My findings suggest that team production does in fact improve financial performance for the typical establishment but that self-managed or autonomous teams do no better than closely supervised or non-autonomous teams. I also find that the magnitude of benefits to establishments that are helped by teams far exceeds the magnitude of costs to establishments that are hurt by teams. Finally, I find two interesting patterns of correlations among the unobserved determinants of teams, autonomy, and financial performance. First, unobserved factors that increase the propensity to engage in teams are positively correlated with unobserved determinants of financial performance. Second, unobserved factors that increase the propensity to grant teams autonomy are negatively correlated with unobserved determinants of financial performance when teams are used.

European Economic Review, 2008

I analyze employer recruitment decisions using a dynamic, discrete-choice structural model that I... more I analyze employer recruitment decisions using a dynamic, discrete-choice structural model that I estimate on a sample of clerical workers from the MCSUI, a large cross section of establishments in four metropolitan areas of the US. In the model, employers choose either informal recruitment methods (which generate a small but select applicant pool from which the employer can hire quickly) or formal methods (which create a large but less select applicant pool which the employer must screen intensively, delaying hiring times). I study the effects of three counterfactual simulations on recruitment strategies, starting wages, and vacancy durations: A wage subsidy, a policy designed to improve information about prospective matches, and an increase in the heterogeneity of prospective matches. I show that the effects of exogenous policy or environmental changes can be decomposed into ''pure wage effects'' that affect the wage offers employers post, holding constant their recruitment strategies, and ''recruitment-wage effects'' that involve changes in recruitment methods. The results show that changes in recruitment strategies represent an important channel through which changes in the economic environment affect the starting wages and vacancy duration for new hires.

Economic Inquiry, 2005

[Excerpt] The results in this paper suggest, among other things, a strong association between rec... more [Excerpt] The results in this paper suggest, among other things, a strong association between recruitment choices and starting wages. The theoretical framework motivating the empirical analysis is a wageposting game in which firms make wage offers and choose recruitment strategies while recognizing a tradeoff between hiring speed and match quality. Introducing this methodological framework to the recruitment literature, I present new evidence on employers' choices of recruitment methods to answer the questions, "How do employer recruitment choices vary by firm and vacancy characteristics and the skill requirements of jobs," and "How do vacancy duration and starting wages vary with recruitment choices?"

he United States experienced a rise in inflation from 5.5 percent in the first quarter of 1976 to... more he United States experienced a rise in inflation from 5.5 percent in the first quarter of 1976 to 9.4 percent in the first quarter of 1980. This steep increase was followed by the desire to stem inflation and to reverse its course. Therefore, soon after Paul Volcker was appointed chairman of the Federal Reserve Board in August 1979, the Federal Reserve (the Fed) announced new operating procedures and put in place a disinflationary policy. During the implementation of that policy, two recessions came in rapid succession. The first began in January 1980 and lasted through the middle of that year. Although short in duration, the recession was deep, with real GDP falling at an annual rate of 10.

Strategic Management Journal, 2006

In this analysis I study promotion schemes as human resource management strategies by which the f... more In this analysis I study promotion schemes as human resource management strategies by which the firm can realize strategic goals by motivating workers to higher levels of effort and performance. Using information on promotions, wages, and performance for professional workers in a cross section of establishments in four metropolitan areas of the U.S., I investigate empirically the proposition that firms strategically organize promotion tournaments to motivate workers to higher levels of performance. I present evidence suggesting that relative performance of workers determines promotions, supporting the notion of internal promotion competitions in which internal hiring policies and fixed job slots combine to create competitions among workers of a given rank in a firm. I then estimate a structural model of promotion tournaments that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the prediction of tournament theory that workers are motivated by larger spreads. * I have benefited considerably from discussions of this work with numerous colleagues. The comments of Chris Collins, Daniel Simon, the editor, and an anonymous referee were particularly helpful. David Rosenblum provided outstanding research assistance.

Labour Economics, Dec 1, 2011

We study the effect of product market volatility on a firm's choice between multiskilling and spe... more We study the effect of product market volatility on a firm's choice between multiskilling and specialization. We construct a theoretical model that captures the tradeoff between multiskilling (which gives greater flexibility to reassign workers in production) and specialization (which provides workers with the expertise to respond to product market signals in their area of specialty). Using data from the 2004 WERS, a nationally-representative cross section of British establishments, we find that greater volatility is associated with greater specialization. This result holds both inside and outside of manufacturing, but consistent with our model, it holds only in multi-product establishments and not in single-product ones.

The Journal of Law, Economics, and Organization, 2019

A model of employer learning (both symmetric and asymmetric) about worker ability from job histor... more A model of employer learning (both symmetric and asymmetric) about worker ability from job histories is constructed, and testable implications are derived to detect asymmetric learning empirically. The model predicts that early-career bad job matches are particularly damaging when learning is asymmetric. Analysis of NLSY79 data reveals that job hopping is associated with lower wages for college graduates, controlling for measured ability, labor market experience, and current job tenure. Suggestive of asymmetric learning, the effect is strongest for job tenures less than one year and for early-career workers, and mitigated when job hopping severs matches that were formed during economic downturns. (JEL D82, J31, J63)

Industrial Relations: A Journal of Economy and Society

Incumbents in electoral regimes often retain power despite having to regularly compete in multipa... more Incumbents in electoral regimes often retain power despite having to regularly compete in multiparty elections. We examine a specific channel through which incumbents can seek to prevent the emergence of a strong opposition that might threaten them in future elections. We present a formal model demonstrating that incumbents can strategically induce opposition fragmentation by appointing some opposition members to ministerial cabinet positions. Opposition politicians who have the opportunity to secure a cabinet position in an incumbent's government tend to compete for office independently rather than coalescing into broad-based parties or electoral alliances. The model shows that weaker incumbents are more likely to rely on this cooptation strategy. Using original data on presidential elections across African countries in 1990-2016, we show that past cooptation of opposition politicians is associated with a more fragmented opposition field in subsequent elections.

Standard agency theories predict a positive relationship between incentive pay and the degree to ... more Standard agency theories predict a positive relationship between incentive pay and the degree to which workers have authority over how they do their jobs (e.g. which projects to select). With stronger incentives, when selecting projects, agents place relatively more weight on the monetary returns to a given project, and less weight on their own private beneflt (i.e. utility) from the project. This paper, in contrast, suggests that when projects have a positive risk-return tradeofi and the agent is more risk averse than the principal, delegation of authority could imply weaker incentives. Weaker incentives reduce an agent’s exposure to risk, leading to higher-return projects being selected. This creates a tension between inducing project selection (exploration) and inducing efiort (exploitation). When exploration is more valuable to the principal than exploitation, delegation and incentives are negatively related. We empirically test these predictions using data from a large cross se...

Strategic Compensation and Talent Management, 2020

SSRN Electronic Journal, 2017

In a multitask, market-based promotion tournament model, under different environments concerning ... more In a multitask, market-based promotion tournament model, under different environments concerning employer learning about worker ability, it is shown that: (a) asymmetric learning in multitask jobs is a necessary condition for "strategic shirking" (i.e., underperforming on certain tasks to increase the promotion probability); (b) when learning becomes increasingly symmetric on one task, the effort allocated to that task could increase or decrease, but effort on the other task increases; (c) strategic shirking does not occur in equilibrium in single-task models; and (d) promotions signal worker ability even when there is symmetric learning on one task, if learning is asymmetric on another. 1 | INTRODUCTION Ambitious, career-conscious workers are ever alert to ways they can outshine their peers in promotion contests. Talent and hard work are well-known ingredients for success, but their roles in determining promotions complexify when jobs are comprised of multiple tasks, as is usually the case in organizations. For example, police officers engage in primary tasks (e.g., making traffic stops, and pursuing and apprehending suspects) and, to a lesser extent, in managerial and leadership tasks, and public speaking. For police chiefs, however, the relative emphases placed on those activities are reversed. Similarly, school teachers are primarily engaged with educating students, whereas managerial and leadership activities (beyond the classroom setting) are not central to their job. For the school principals who supervise them, however, the relative emphases on those tasks are reversed. In both settings, the police officers and teachers who do stellar work on their primary tasks might actually be denied promotions because they are deemed indispensable in their current jobs, relative to their coworkers. A better strategy for achieving promotion to police chief, or to principal, might be to purposely underperform (or "strategically shirk") on the primary tasks while overperforming on the leadership tasks that are emphasized in the managerial job. 1 Strategic shirking is a fundamental incentive problem arising in multitask promotion tournaments, but it has only been analyzed in "classic" settings in which the employer precommits to the wages paid to promoted and nonpromoted workers to elicit desired worker behavior (e.g., effort choices) without direct influence from an outside market of competing firms. The goal of this study is to analyze the problem in "market-based" settings in which wages are determined by the bids of competing firms, as in Waldman (1984). This contribution in a multitask setting parallels recent developments in the (single-task) tournament literature. The bulk of that literature, starting with Lazear and Rosen (1981), concerns "classic tournaments" in which the employer can precommit to the prize structure. Recently, a

ILR Review, 2016

Using panel data from 2004 and 2011, the authors find an elevated incidence of work-related ailme... more Using panel data from 2004 and 2011, the authors find an elevated incidence of work-related ailments (associated with bones, muscles, and joints) in U.K. establishments that use individual performance pay, even after accounting for establishment fixed effects. Fixed-effect estimates also confirm a positive relationship between absence due to illness and performance pay. The elevated rates of ailments associated with performance pay appear to reduce financial performance and product quality, even though performance pay has a positive net influence on financial performance. Thus, a hidden cost of performance pay is occupational health deterioration. Parallel results are absent for labor productivity and, in a smaller sample, for profit.

SSRN Electronic Journal, 2015

We develop a theoretical model in which workers derive intrinsic motivation from their nonprofit ... more We develop a theoretical model in which workers derive intrinsic motivation from their nonprofit employer's social mission. We use it to explain: a) differences between nonprofits and for-profits in wages, incentive pay, training, fringe benefits, and recruitment, and b) the mixed empirical evidence concerning the sign of the nonprofit compensating wage differential. We use a unique dataset of California establishments to provide new evidence on sectorial differences in pay and HRM systems, interpreting these differences in light of the theoretical model. We find a greater incidence of training and benefits in nonprofits, and higher wages and incentive pay in for-profits.

SSRN Electronic Journal, 2012

We provide a theoretical analysis of promotion tournaments in which workers "strategically shirk"... more We provide a theoretical analysis of promotion tournaments in which workers "strategically shirk" by purposely under-performing on tasks that are de-emphasized in a promotion rule, while over-performing in tasks that are emphasized in the rule, thereby increasing their chances of promotion and a wage increase. To mitigate the multitasking problem, the …rm might commit upfront to a promotion rule that requires more balance in the performances across tasks in a job than would otherwise be justi…ed on productivity grounds. The analysis shows how "Putt's Law" (which states that competent workers are sometimes passed over for promotion in favor of incompetent ones) can be understood as a natural consequence of the …rm designing optimal promotion rules.

Strategic Organization, 2011

Theorizing in strategic organization often leads researchers to state hypotheses involving mediat... more Theorizing in strategic organization often leads researchers to state hypotheses involving mediating effects, in which an antecedent variable, X, affects an outcome, Y, through the intermediate channel of a mediator, M (Whetten, 1989). Sometimes the entire effect of X on Y is thought to operate through M (i.e. complete mediation), and sometimes X is thought to affect Y directly and also indirectly through M (i.e. partial mediation). When empirical researchers set out to test such mediating hypotheses the vast majority of tests use either of two standard methodologies introduced in the mid-1980s. The first is the 'causal steps' approach of Baron and Kenny (1986), extended in Kenny et al. (1998) and further discussed in MacKinnon et al. (2002) and Shrout and Bolger (2002). The second is the SEM approach, advocated in James and Brett (1984) and further discussed in James et al. (2006). While the two standard methods and their variants feature an appealing simplicity that has sustained their popularity for decades, they both require a stringent assumption that is unlikely to hold in most contexts of interest in strategic organization research. The result has been a proliferation of studies reporting problematic tests of mediating effects. 1 The good news is that better, instrument-based mediation tests such as two-stage least squares (2SLS) and three-stage least squares (3SLS) that do not require the stringent assumptions underlying the standard methods are available and have been well known for decades. The bad news is that they are rarely used, despite some clear and compelling articulations of their merits (e.g. Shaver, 2005). Some have recently argued that research in strategic organization would benefit from adopting these alternative methods given that they do not require the stringent assumptions of the standard methods (DeVaro, 2011; Shaver, 2005; Wood et al., 2008). The key point is not that evidence of mediating effects is more or less likely to be uncovered using the alternative methods versus the standard methods but rather that the standard methods are more likely to support incorrect conclusions regarding mediation. This essay offers a program for mediation remediation in the field of strategic organization and complements earlier papers that emphasized the importance of endogeneity and of correct interpretation of regressions in strategic organization research (e.g. Bascle, 2008; Hamilton and Nickerson, 2003; Yip and Tsang, 2007). It also provides a useful addition to the 'hallmarks of high-quality empirical research' identified in Oxley et al. (2010). But the call to replace the standard methods with instrument-based ones is not new. Given that the most important arguments for instrument-based methods have been made cogently beforewithout appreciably shifting the literature away from the standard methods-it is fair to ask what value there is in yet another orator ascending the soapbox to critique the standard methods. My answer is to focus this essay on what I see as the main reasons why scholars resist moving beyond 26357S OQ9410.1177/1476127011426357DeVaroStrategic Organization

Strategic Management Journal, 2006

[Excerpt] In this analysis I study promotion schemes as human resource management strategies by w... more [Excerpt] In this analysis I study promotion schemes as human resource management strategies by which the firm can realize strategic goals by motivating workers to higher levels of effort and performance. Using information on promotions, wages, and performance for professional workers in a cross section of establishments in four metropolitan areas of the U.S., I investigate empirically the proposition that firms strategically organize promotion tournaments to motivate workers to higher levels of performance. I present evidence suggesting that relative performance of workers determines promotions, supporting the notion of internal promotion competitions in which internal hiring policies and fixed job slots combine to create competitions among workers of a given rank in a firm. I then estimate a structural model of promotion tournaments that simultaneously accounts for worker and firm behavior and how the interaction of these behaviors gives rise to promotions. The results are consistent with the prediction of tournament theory that workers are motivated by larger spreads.

Southern Economic Journal, 1986

The RAND Journal of Economics, 2006

I propose a structural model of promotion tournaments and estimate it on a sample of professional... more I propose a structural model of promotion tournaments and estimate it on a sample of professional workers in a cross section of firms. I find strong evidence that relative performance of workers, as opposed to absolute performance, determines promotions. However, the data do not support the predictions of tournament theory that worker performance is increasing in the wage spreads from promotions and that firms optimally set wage spreads to induce higher levels of performance. The findings are suggestive of internal promotion competitions and fixed job slots as the average tendency describing promotion decisions in firms. JEL Classification: M51

Industrial Relations, 2006

I estimate a structural model of teams, autonomy, and financial performance, using a large cross ... more I estimate a structural model of teams, autonomy, and financial performance, using a large cross section of British establishments. My findings suggest that team production does in fact improve financial performance for the typical establishment but that self-managed or autonomous teams do no better than closely supervised or non-autonomous teams. I also find that the magnitude of benefits to establishments that are helped by teams far exceeds the magnitude of costs to establishments that are hurt by teams. Finally, I find two interesting patterns of correlations among the unobserved determinants of teams, autonomy, and financial performance. First, unobserved factors that increase the propensity to engage in teams are positively correlated with unobserved determinants of financial performance. Second, unobserved factors that increase the propensity to grant teams autonomy are negatively correlated with unobserved determinants of financial performance when teams are used.

European Economic Review, 2008

I analyze employer recruitment decisions using a dynamic, discrete-choice structural model that I... more I analyze employer recruitment decisions using a dynamic, discrete-choice structural model that I estimate on a sample of clerical workers from the MCSUI, a large cross section of establishments in four metropolitan areas of the US. In the model, employers choose either informal recruitment methods (which generate a small but select applicant pool from which the employer can hire quickly) or formal methods (which create a large but less select applicant pool which the employer must screen intensively, delaying hiring times). I study the effects of three counterfactual simulations on recruitment strategies, starting wages, and vacancy durations: A wage subsidy, a policy designed to improve information about prospective matches, and an increase in the heterogeneity of prospective matches. I show that the effects of exogenous policy or environmental changes can be decomposed into ''pure wage effects'' that affect the wage offers employers post, holding constant their recruitment strategies, and ''recruitment-wage effects'' that involve changes in recruitment methods. The results show that changes in recruitment strategies represent an important channel through which changes in the economic environment affect the starting wages and vacancy duration for new hires.

Economic Inquiry, 2005

[Excerpt] The results in this paper suggest, among other things, a strong association between rec... more [Excerpt] The results in this paper suggest, among other things, a strong association between recruitment choices and starting wages. The theoretical framework motivating the empirical analysis is a wageposting game in which firms make wage offers and choose recruitment strategies while recognizing a tradeoff between hiring speed and match quality. Introducing this methodological framework to the recruitment literature, I present new evidence on employers' choices of recruitment methods to answer the questions, "How do employer recruitment choices vary by firm and vacancy characteristics and the skill requirements of jobs," and "How do vacancy duration and starting wages vary with recruitment choices?"

he United States experienced a rise in inflation from 5.5 percent in the first quarter of 1976 to... more he United States experienced a rise in inflation from 5.5 percent in the first quarter of 1976 to 9.4 percent in the first quarter of 1980. This steep increase was followed by the desire to stem inflation and to reverse its course. Therefore, soon after Paul Volcker was appointed chairman of the Federal Reserve Board in August 1979, the Federal Reserve (the Fed) announced new operating procedures and put in place a disinflationary policy. During the implementation of that policy, two recessions came in rapid succession. The first began in January 1980 and lasted through the middle of that year. Although short in duration, the recession was deep, with real GDP falling at an annual rate of 10.