Be Nice to Your Innovators: Employee Treatment and Corporate Innovation Performance

53 Pages Posted: 2 Jul 2014 Last revised: 8 Jun 2016

See all articles by Chen Chen

Chen Chen

Monash University - Department of Accounting

Yangyang Chen

City University of Hong Kong (CityUHK) - Department of Accountancy

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Edward Podolski

Deakin University; Financial Research Network (FIRN)

Date Written: June 7, 2016

Abstract

This paper investigates the effect that employee treatment schemes have on corporate innovation performance. We find that firms with better employee treatment schemes produce more and better patents through improving employee satisfaction and teamwork. Additional tests suggest that our main findings cannot be attributed to job security, unionization, reverse causality, and omitted variables. We also find that firms with better employee treatment schemes produce patents that enhance market valuation and facilitate better future operating performance. Collectively, our findings show that treating employees well benefits firms and shareholders, for well treated employees are encouraged to create intellectual property.

Keywords: Employee satisfaction; Corporate innovation; Innovative strategies; Patents; Citations

JEL Classification: G32, M14, M51, O31

Suggested Citation

Chen, Chen and Chen, Yangyang and Hsu, Po-Hsuan and Podolski, Edward, Be Nice to Your Innovators: Employee Treatment and Corporate Innovation Performance (June 7, 2016). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2461021 or http://dx.doi.org/10.2139/ssrn.2461021

Chen Chen

Monash University - Department of Accounting ( email )

Building H, Level 3
Caulfield campus
Melbourne, Victoria 3800
Australia

Yangyang Chen (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

Edward Podolski

Deakin University ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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