Philipp Meyer-Doyle

How Performance Incentives Shape Individual Exploration and Exploitation: Evidence from Microdata

The existing literature has highlighted the role of individuals in exploration and exploitation, yet our understanding of what shapes those activities at the individual level remains limited. We integrate the literatures on exploration/exploitation and incentives to examine how incentives impact individual behavior to explore new ideas or exploit existing ideas. Using novel microdata on the commercial projects of sales employees at a South Korean e-commerce firm, we find that individuals engage in relatively more exploration when performance-based incentives are weakened; yet, interestingly, this increase in exploration is driven mainly by high-performing individuals in our setting. Weakening performance-based incentives also lead to higher exploration performance via experiential learning, especially for individuals who work in complex task environments. Overall, this study contributes to the literature on exploration/exploitation by examining how individual exploration and exploitation behavior and performance is shaped by incentives. We also contribute to the incentives literature by investigating the implications of incentives in an important domain, namely, that of knowledge exploration behavior. This study also provides insights into important individual-level microfoundations of firm capabilities and performance by highlighting the important role of individuals in exploration/exploitation activities and how this role is contextualized by the incentives a firm deploys.

Inherited Agglomeration Effects in Hedge Funds

This paper studies inherited agglomeration effects, how human capital that accrues to managers while working at a parent firm in an industry hub can be subsequently transferred to a spinoff. We test for inherited agglomeration effects in the context of the hedge fund industry and find that hedge fund managers who previously worked in New York and London outperform their peers who worked elsewhere previously by 10-14 basis points per month or about 1.5% per year. The results are driven by managers who worked in investment management positions previously, and are at least as large as traditional agglomeration effects that arise from being located in an industry hub contemporaneously. The evidence suggests that inherited agglomeration effects are an important, but as yet overlooked, factor influencing the performance of new firms.

Resource Reconfiguration in Human-Capital-Intensive Firms

Human-capital-intensive firms face a dilemma in reconfiguring their human asset teams as new opportunities arise. Greater team reconfiguration is helpful to spread knowledge and create social capital within the firm, whereas less team reconfiguration has the advantage of efficiency and performance predictability. We examine client-related determinants affecting such reconfiguration in the context of UK merger and acquisition (M&A) law firms and the M&A legal advisory services they provide to corporate clients. Our results provide empirical support for the proposition that client-related factors influence the reconfiguration of human asset teams. We find as a baseline that human assets are less likely to collaborate with each other on a team if they have recently collaborated (i.e., greater reconfiguration). However, we find that reconfiguration is lower when partners have a relationship with the focal client, but higher when the client is more embedded within the firm. Second, client attributes are important for reconfiguration: human asset teams reconfigure less for high-status clients, but reconfigure more for clients who spread their M&A legal work across many different firms. Finally, we find that resource constraint on partners results in greater reconfiguration, whereas resource constraint on the firm is associated with less reconfiguration. Our findings contribute to the research literatures on strategic human capital, professional service firms, and resource reconfiguration.Extant research has highlighted the importance of resource reconfiguration for firm performance and has identified important drivers of the reconfiguration of macro-level resources, e.g. business units, focusing primarily on supply-side factors. Yet less is known about drivers of the reconfiguration of micro-level resources, e.g. human assets, and about the role which demand-side factors play in resource reconfiguration. We address these gaps and investigate how client-related factors influence the reconfiguration of micro-level resources in human-asset-intensive firms. Using fine-grained data on law firms advising on M&A mandates, we find that law firms are less likely to reconfigure their human assets (lawyers) on mandates for high-status clients, but more likely to reconfigure them when a client has a greater proclivity to switch business between multiple suppliers. Law firms also reconfigure their human assets less for incoming client projects when they have provided prior M&A services to the client, but they are more likely to reconfigure them when the client relationship has a broader scope. Finally, we also show that the size of a firms client portfolio lowers reconfiguration. Our paper extends the literature on resource reconfiguration by explicating antecedents of the reconfiguration of micro-level resources and by highlighting the role demand-side factors play in it. We also contribute to the strategic human capital literature by showing how demand-side factors shape human capital deployment. Finally, we also add to the micro-foundations of resource-based theory by studying important micro-foundational processes underlying a firms capacity to reconfigure its resources.

How CEO and CFO Regulatory Focus Interact to Shape the Firm’s Corporate Strategy

We examine how the CEO’s and CFO’s regulatory focus interact to shape the firm’s corporate strategy and what happens in cases where they are misaligned. Making use of micro-data on the promotion focus of CEOs and CFOs and their firms’ corporate strategy announcements, we find that both are important drivers of the firms’ growth-oriented initiatives, and that this impact is amplified if they align. In cases of misalignment, we find that on average CEOs prevail, but this effect depends on CEOs’ power. Interestingly, misalignment between CEO and CFO regulatory focus has positive performance implications, suggesting important complementarities between CEOs and CFOs. Our study contributes to the literatures on strategic leadership, corporate strategy, and micro-foundations of strategy.

Generalist vs. Specialist CEOs: How CEO Human Capital Shapes Firm Acquisition Behavior and Success

We examine how the general human capital of CEOs affects the acquisition behavior and performance of firms. Making use of micro-data on CEOs and the acquisitions they engage in, we find that genera...

EFFICIENCY AND INFLUENCE IN THE DEPLOYMENT OF HUMAN ASSETS: EVIDENCE FROM M&A LEGAL ADVISORS

We examine how firms deploy their human assets under efficiency considerations, and how individuals seek to influence these deployment decisions for private gain. Our empirical context is the UK M&...

Deploying Individual-Level Resources Under Constraints: Evidence from the UK M&A Legal Advisory Market

In this paper, we develop and test a framework to better understand how firms strategically deploy their individual-level resources to opportunities. We analyze the allocation of individual-level resources (lawyers) to projects (M&A mandates) in the UK corporate M&A legal market. We find evidence that firms adapt their allocation decisions to deal with the constraints on resource deployment associated with resource scarcity and congestion. Specifically, firms appear to adopt five strategies to manage their constrained resources: Load Equalization, Selective Stretching, Assortative Matching, Relationship Building, and Relational Capital Substitution. We also find suggestive evidence of firm level heterogeneity in the firm’s ability to appropriately deploy resources. Overall, this paper refines the understanding of the resource deployment process and of individuals as rent-generating assets.

Combining Financial and Organizational Incentives to Better Align Individual Behaviour with Organizational Goals

Much of the existing literature has focused on financial incentives to align individual behaviour with organizational goals, based on the assumption that individual behaviour is largely motivated by expected pecuniary payoffs. However, past and more recent economic developments show that financial incentives can induce myopic behaviour, and thereby financial incentives alone appear to be aligning individual behaviour with organizational goals too myopically. In this paper, we embrace the idea that individual behaviour is also socially embedded and motivated in order to explore incentives that are geared towards producing long-term oriented behaviour. Specifically, we focus on incentives stem from an individual’s social embeddedness in an organization. We define such ‘organizational incentives’ and discuss their theoretical foundations. However, as we show, organizational incentives alone motivate individual behaviour that is too hyperopic (overly concerned with the long-term survival of the organization). Therefore, we argue that the organization is best served by combining individualistic financial incentives with the socially embedded organizational incentives to motivate individual behaviour which is neither myopic nor hyperopic and which is more in line with organizational goals. We discuss how firms can adjust their financial and organizational incentives accordingly and combine them effectively, and what factors foster an effective combination of financial and organizational incentives.