Abstract Research Summary We introduce the concept of pay‐for‐prominence , a system where employees are monetarily incentivized to become knowledge hubs in the intrafirm network and examine its effects on employees' networks and attrition. Integrating social network theory with relational incentives theory, we argue that pay‐for‐prominence motivates strategic networking behaviors that lead to the emergence of prominent connectors. However, these changes are associated with higher attrition as employees are preoccupied with networking, thus suggesting a trade‐off between enhanced connectivity in the short term and the risk of network fragmentation in the long term. Using a field quasi‐experiment in a multinational firm, we show that organizations can successfully incentivize employees' network prominence, but doing so may produce unintended consequences. Managerial Summary We examine the impact of using monetary incentives to encourage employees to become knowledge hubs in the workplace informal network—a term we label pay‐for‐prominence. We find that offering monetary rewards based on network metrics encourages employees to broaden their connections, enhancing knowledge flows within the firm. However, employees who become more socially prominent experience higher attrition than those who do not, as they become preoccupied with networking. Therefore, while incentivizing networking can improve knowledge sharing, it also requires careful management to avoid unintended consequences, such as the exit of key players that could cause fragmentation of the social network. Managers should weigh the benefits of increased connectivity against the risks of fragmentation when designing incentive programs aimed at fostering informal networks.
Prior research suggests that institutional investors' liberalism is associated with firms' engagement in environmental sustainability, yet whether this association manifests in symbolic or substantive actions remains unclear. Taking a question‐driven approach, our analyses of Russell 3000 firms (2010–2020) reveal that investor liberalism, measured as the proportion of donations made to the Democratic Party, is positively associated with symbolic climate actions only from 2016 onward (a period when political polarization intensified), reversing a negative association during 2010–2015. Its positive association with substantive actions from 2016 onward, however, appears only among consistent Democratic donors (stronger liberal values), among dedicated investors, or in firms without CEO duality (greater investor influence). These findings indicate that liberal investor ownership may encourage, rather than deter, firms' environmental decoupling. Liberal institutional investors tend to favor greater corporate environmental sustainability efforts, but are they associated with firms' symbolic or substantive climate actions? Our findings based on U.S. firms reveal that across the full 2010–2020 period, firms with more liberal investors, as indicated by their Democratic‐leaning political donations, do not exhibit more symbolic or substantive climate actions. From 2016 onward, as political polarization intensified, firms with more liberal investors exhibited more symbolic climate actions but not substantive ones. During this period, only investors with stronger liberal commitment (i.e., consistent Democratic donors) are associated with more substantive actions. Democratic‐donating investors are also associated with more substantive actions when they are dedicated investors or when firm CEOs do not chair their boards.
Research Summary This study examines how divisionalized firm structures shape the gender gap in internal chief executive officer (CEO) promotion. We argue that divisionalized firms may narrow the gender gap in CEO succession by generating more individually attributable performance information about senior managers. In contrast to firms in which candidates' contributions are difficult to isolate, divisionalized firms create profit-and-loss (P&L) accountability that makes managerial performance more visible and comparable. Using longitudinal data on over 616,000 managers in 49,135 US firms, we find that women are more likely to be promoted to CEO in divisionalized firms. We also find that the gender gap is smaller among managers with prior P&L-accountable experience. Among managers in divisionalized firms, stronger unit performance relative to within-firm peers is more positively associated with promotion to CEO for women than for men. The results highlight organizational structure as a potential source of variation in gender inequality in executive advancement.Managerial Summary Why do so few women become CEOs? Part of the answer lies in how firms are organized. When a company is structured into divisions with their own profit-and-loss responsibility, the results of the managers who lead those units are easier to observe, compare, and credit to the individual. This leaves less room for subjective judgments through which gender bias often enters promotion decisions. In data on more than 600,000 managers at roughly 49,000 US firms, we find that women are more likely to be promoted to CEO in divisionalized firms. The pattern is strongest for women who have led a business unit, and strong unit results count for more in women's promotion prospects. For boards seeking greater gender equity in CEO succession, structures and evaluation systems that give senior leaders clear, comparable performance records may matter as much as diversity initiatives.
Research Summary Strategy scholars have theoretically explored the relationship between legal knowledge protection and modularity of innovation activities in firms, but this relationship has yet to be empirically tested in the literature. Leveraging state-level changes in US trade secrecy law and using a network modularity measure, this paper examines how trade secret protection affects the modularity of firms' innovation activities. Analyzing intrafirm inventor collaboration patterns in US patent data from 783 high-tech firms between 1976 and 2017, we find that increased trade secret protection is negatively associated with the modularity of innovation activities within firms. This effect is more pronounced for firms with superior technologies and those geographically collocated with competitors-factors that enhance firms' knowledge appropriability concerns-and less pronounced for firms in industries where alternative appropriability mechanisms are highly effective. Moreover, our findings suggest that the increased betweenness centrality of new hires (skilled and junior) serves as an important underlying mechanism for the treatment effect. These results contribute to the literature by illuminating how firms strategize their internal innovation activities for knowledge protection and by underscoring its underlying mechanism.Managerial Summary Firms often modularize innovation activities to safeguard proprietary knowledge, but this approach can undermine innovation performance by restricting knowledge integration within organizations. This study demonstrates that stronger legal mechanisms alleviating firms' knowledge protection concerns, such as increased trade secret protection, encourage firms to adopt a less modularized, more integrated innovation system. Furthermore, we find that under such protections, firms are more likely to position new hires, including both skilled and junior employees, in central roles to connect innovation communities within the organization. These findings offer valuable insights for managers, illustrating how knowledge protection concerns can shape the structure of firms' innovation activities.
Research Summary This study investigates client tie diversification, where firms enter markets with existing clients. Recognizing the theoretical basis for both positive and negative performance implications, the paper adopts a question-driven approach and discovers a strong negative correlation between client tie diversification and firm performance. Using data from the US federal lobbying industry during the creation of the Homeland Security issue market post-9/11, I find that lobbying firms entering the new market with existing clients underperform compared to other firms. This underperformance is associated with over-embeddedness with clients and agency costs from dispersed client tie ownership among lobbyists. These findings challenge the notion that client ties are readily fungible and highlight relational and agency-related complexities that can lead firms to pursue value-destroying diversification.Managerial Summary Do firms perform better when they diversify into new markets with their existing clients, or by pursuing new opportunities independently? This study found that firms that enter new markets alongside their current clients often underperform compared to those that do not. While it might seem beneficial to leverage existing client relationships, this approach can push firms into areas where they lack capabilities, create inefficiencies, and complicate relationships with other clients, leading to weaker performance. Managers should be cautious about letting client needs drive diversification decisions. Prioritizing current clients may offer short-term gains but can limit the firm's ability to explore new markets and achieve long-term growth. Strategic choices should balance client requests with the firm's own strengths and future prospects.
