Employee incentives to make firm specific investment: Implications for resource-based theories of corporate diversification

• Main Authors: WANG, Heli, Barney, Jay B.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2006
• Subjects: incentives in industry; industrial management; investments; employees; decision making; diversification in industry; risk management in business; business enterprises; diversified companies; business planning; employee motivation; management; Finance and Financial Management; Human Resources Management; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3456; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4455/viewcontent/Employee_Incentive_2006_pv.pdf
• Institution: Singapore Management University

We argue that the risk associated with the value of a firm's core resources has an impact on employee decisions to make firm-specific investments, independent of the threat of opportunism that might exist in a particular exchange. We further explore mechanisms firms may adopt to mitigate the employee incentive problem stemming from the risk associated with core resource value. These arguments shed new light on resource-based theories of corporate diversification.