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Assessing the Economic Value of a Positive Work Environment

Assessing the Economic Value of a Positive Work Environment

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An essay for the 2012 Undergraduate Awards (International Programme) Competition by Sunnie Tölle. Originally submitted for Economics at Yale University, with lecturer Prof. Tony A. Smith in the category of Business & Economics
An essay for the 2012 Undergraduate Awards (International Programme) Competition by Sunnie Tölle. Originally submitted for Economics at Yale University, with lecturer Prof. Tony A. Smith in the category of Business & Economics

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Published by: Undergraduate Awards on Aug 31, 2012
Copyright:Attribution Non-commercial

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10/27/2013

 
DohappyworkershaveanimpactontheeconomicperformanceofAmerica’slargestcompanies?
 
AssessingtheEconomicValueofaPositiveWorkEnvironment
 
 
Abstract

 Does a positive work environment in which employees are happy at work have an impact on thefinancial performance of America’s largest companies? This essay examines the question mainlyfrom a quantitative angle, but also offers some complimentary qualitative evidence in theconcluding section. The empirical results obtained by means of a formal econometric regressionsuggest that certain aspects, particularly the variables “career opportunity” and “overallreputation” of the company affect revenue as well as the market capitalization of the company ata 5% significance level. The quantitative analysis, for which 10 high level senior executives wereinterviewed, is presented in the final part of the essay and supports this finding. In particular, theinterview findings suggest that a positive work environment is becoming more important as acompetitive advantage in the increasingly global talent war among multinational corporations.Overall, this essay shows that a positive work environment has a significant impact on thefinancial performance of a company and can, if made a priority by senior management and acrossdepartments, drive and sustain the financial success of large American corporations.
 
1 Introduction
 
In today’s globalized economy, America is increasingly reliant on knowledge, innovationand creativity to uphold its competitive advantage in the world. According to OECD Secretary-General Angel Gurría: “Countries need to harness innovation and entrepreneurship to boostgrowth and employment. This is the key to a sustainable rise in living standards“ (OECD, 2010).Similarly, The
Creative Economy Report 2008, a
 joint initiative by five United Nationsorganizations, states that the creative industries are among the most dynamic, emerging sectors inworld trade. Between 2000 and 2005 alone, trade in creative goods and services increased at anunprecedented average annual rate of 8.7 per cent. This positive trend occurred in all regions andgroups of countries and, according to the authors of the report, is expected to continue into thenext decade, assuming that the global demand for creative goods and services continues to rise.Based on this finding, the report encourages countries to make strategic choices to strengthentheir creative economies (UNCTAD 2008).In the knowledge-based economy of the twenty-first century, innovation, creativity, fast-paced change, global collaboration and rapid technological advances are vital components of thelandscape in which businesses operate. For a company to thrive under these circumstances, itsbiggest investment and its primary assets are human capital. Human capital, in turn, consists of social and psychological capital. In particular, social capital leads people to want to be in a groupand learn from it, while psychological capital equips them with the tools to do so effectively(Pryce-Jones, 2010).

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