The effect of compensation program and structure on sbu competitive strategy: A study of technology-intensive firms (original) (raw)
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JBM, 2010
Little research has been done to try and connect type of compensation with the use of a specific competitive strategy. We propose that compensation (percentage of base, bonus, options-granted, and stock for the top management team) will moderate the innovation strategy to performance relationship based on risk and time horizon. Analyses of panel data from 1994 to 1998 for 380 firms show that the innovation strategy to performance relationship is moderated by bonus and options-granted compensation. These findings suggest that implementing an innovation strategy and using a high percentage of bonus compensation will lead to greater performance. Alternately, implementing an innovation strategy and using a low percentage of options granted will create the best outcome. Our findings help shed light on the firm-specific mechanisms that enable strategy implementation. Recent global and economic conditions have reduced the slack available to organizations and have also heightened the need for effective strategy implementation. Given global economic realities, it is critical that firms focus on all aspects of the organization necessary to implement their chosen strategy. Previous research has demonstrated that a variety of organizational attributes are critical to implementation efforts. These include supply chain coordination, organizational design, workforce configuration, and human resource management policies (Shaw, Gupta & Delery,
Journal of Business Research, 1994
We compare top management compensation among prospector, defender, and analyzer strategic types, and the eficts of difirences in managers' employment risks,firm peuformance, andfirm size. Prospectors performed better and they paid their top management group more than did analyzers. They were also bigger, their managers faced more emplqment risks, and they paid their CEOs more than did defenders or analyzers. Sign$cant d$erences were found among the three strategic types in managers' employment risks,firm perfrmance, and size. On average, the strategic types whose managersfaced greater employment risks also compensated their top management group more, providing evidence of a positive relationship between risk and return at the level of strategic types. Confirming previous findmgs, firm size constituted the greatest influence on top management compensation. J BURN RES 1994. 30.149-159 T op management compensation and pay practices can be seen as corporate governance mechanisms designed to deal with the agency problem (
Research Policy
We investigate the relationship between a firm's compensation structure and the extent to which its innovation is more exploration versus exploitation oriented. Specifically, we assess two aspects of a firm's compensation design-horizontal dispersion within job levels and vertical tournament incentives between job levels. A six-year panel of compensation records of 671,028 employees working at 81 U.S.-based high technology firms between 1997 and 2002 are used to construct measures that characterize a firm's pay structure, which are linked to these firms' patents filed in the U.S. We find that firms with higher-powered tournament incentives in vertical compensation structure report higher fraction of innovation directed towards exploration. Horizontal pay dispersion, on the other hand, shows a negative relationship with the exploration in firms where R&D employees' age variance is low. In firms where R&D employees' age variance is high, the negative relationship between horizontal pay dispersion and exploration is muted.
Executive compensation is one of the most critically evaluated aspects of a firm. Driving this attention is the debate into what exactly are the consequences of executive pay. Since a majority of prior compensation research has aggregated industries into a single omnibus sample, it has been difficult to detect compensation effects that are likely industry specific. Accordingly, we focus on a high technology industry and examine how CEO incentive compensation affects firm competitive behavior. Utilizing a sample of U.S. pharmaceutical firms, we find that both shortand long-term incentives of a CEO are positively related to firm competitive aggressiveness. Moreover, our results show a positive relationship between long-term incentives of the top executive and the diversity of competitive moves undertaken by the firm. This study contributes to technology management, compensation, and strategy literatures and generates interesting possibilities for future research. #
Managerial Incentives and Investment in R&D in Large Multiproduct Firms
Organization Science, 1993
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Matching compensation and organizational strategies
Strategic Management Journal, 1990
This study examines the impact of organizational strategies (at both the corporate and business unit level) on pay strategies, and their interactive influence on the effectiveness of the compensation system. The empirical findings are based on the survey responses of 192 human resource management executives in business units of large manufacturing firms. Corporate strategy was a significant predictor of pay package design, pay level relative to the market, and pay administration policies. Business unit strategy was a significant predictor of pay package design and pay level relative to the market. The findings are supportive of congruency notions which suggest that the effectiveness of the compensation system is partly a function of the fit between pay strategies and organizational strategies.
Toward a contingency theory of compensation strategy
Strategic Management Journal, 1987
This paper develops several propositions that link compensation strategy and the effectiveness of the compensation system. The underlying argument is that effectiveness at realizing intended pay strategies depends significantly on the existence of a match between compensation strategies, organization and environment. These propositions are tested in a sample of 33 high tech and 72 non-high tech firms or business units in the Boston Route 128 area. Respondents are managers responsible for compensation policies in these firms or business units. The relationships among compensation strategies, organization characteristics and environment are explored. The findings may help researchers conceptualize, and practitioners manage, the relationship between reward processes and strategy in organizations.
European Scientific Journal, ESJ, 2017
This paper deals with the relationship between compensation strategy and business strategy in Croatian companies. It is the first output of a large investigation into compensation management practice and possibilities for its improvement in Croatia. The findings of this paper result from the Delphi method conducted on experts from 13 selected companies. The research results suggested that there is no alignment between compensation strategy and business strategy in Croatian companies. The reasons for this are: lack of clearly defined functional strategy and lack of management engagement in aligning these strategies; unclear company objectives and strategies, as well as frequent changes in business strategy; collective labour agreements and lack of the autonomy of the HR departments. The experts in Croatian companies consider that compensation strategy can impact on firm’s competitiveness through improved employee loyalty and satisfaction; motivation and performance; attracting high q...
Executive Compensation, Financial Constraint and Product Market Strategies
SSRN Electronic Journal, 2000
We introduce a new explanatory variable for a firm's product market behavior. We report significant variation in industry adjusted sales change due to various components of CEO compensation. For example, one standard deviation increase in CEO cash compensation increases industry adjusted sales change by 4.11%, which is economically significant given that the mean value of industry adjusted sales change is 1.859%. This positive significant relationship between industry adjusted sales change and CEO compensation is more prominent when the managers are more entrenched. Finally, we report that financially constrained firms have higher industry adjusted sales change. CEO compensation appears to partially explain this increased industry adjusted sales change for the financially constrained firms. 12