Strategic Organization Design

Knowledge Spillovers and Employee Mobility

Prof Tobias Kretschmer

Institute for Strategy, Technology, and Organization
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Recap

In the last sessions you learned that…

§ Designing an incentive scheme for inventors is a complex task. Other drivers than only a PFP determine how
much effort inventors will dedicate in their tasks.
§ Low-powered incentives can be a compromising design tool to motivate the inventors in their creative
endeavour.
§ Rewarding false positives has a negative impact on scientists’ effort. At the margin, this negative effect is
larger for corporate scientists, who value only the peers’ recognition and have a winner-take-all mentality.

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Goal of this lecture

After this lecture you should be able to

§ …define and contextualize knowledge spillovers.
§ …explain the relevance of knowledge spillovers for mobility.
§ …define and explain the key mechanisms underlying mobility between firms.

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Knowledge Spillovers and Employee Mobility

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Knowledge Spillovers and Employee Mobility

Knowledge Spillovers and Innovation Performance

§ Knowledge spillovers are positive externalities that foster R&D productivity of the organization, hence, its
performance.
§ Knowledge spillovers generate from:
§ Proximity
§ Geographic proximity: localization of patent citations
§ Technological proximity: cross-citations of patents between firm A and firm B
§ Social proximity: decreases in team‘s scientific productivity after the death of the lab superstar
§ Absorptive capacity: absorbing spillovers from others requires the organization to do research itself. Alternatively,
organizations can indirectly absorb from shared suppliers, shared University labs, etc.

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Knowledge Spillovers and Employee Mobility

Knowledge Spillovers and Innovation Performance

§ Employees mobility can enhance/displace the positive effect of knowledge spillovers on R&D productivity

Inter-firm mobility Intra-firm mobility

Mobility of an employee from firm A to Mobility of an employee within the same

firm B. It can be within or across firm (e.g. across business units,
industries; divisions, etc.)

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Employee Mobility and Organizational Performance

Human and Relational Capital

The ways in which employee mobility influences organizational performance derive ultimately from the human
and relational capital that mobile individuals transfer when they move.
Human capital
§ General human capital: knowledge and skills that are applicable to many firms à individuals may be members of an
occupation or profession, such as law and accounting, and specialized knowledge that could be applicable to many firms.
§ Firm-specific human capital
Relational capital
§ A set of resources rooted in relationship à shared among individuals
§ Structural: based on the physical network or structure of the organization
§ Normative: based on trust, reciprocity
§ Cognitive: based on mutual representations, meaning, values and languages

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Employee Mobility and Organizational Performance

Who moves? Attributes and Strategies of Individuals

Destination firms are interested in specific attributes of potential employees’ human and relational capital that
they anticipate provide value
Examples
à Star scientist: have superior human capital and can help increase relational capital by building and maintaining internal
and external ties
à Executive manager: are often responsive to create and maintain market ties in knowledge-intensive industries
à A team: when idiosyncrasy among members is highly valued by the destination firm

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Employee Mobility and Organizational Performance

From where and where to? Attributes and Strategies of Sources and Destination Firms
§ Destination firms are those that value the added benefit of human capital (more/better knowledge) and
relational capital (more/better relations)
§ Does the mobile employee need to be complementary and with similar knowledge respect to the destination
firm?
§ Integration and learning might be easier, but the impact of the inbound employee might be diminished as a result of a
redundancy of knowledge
§ Integration effects influence mostly immediate collaborators if no further organization change will happen

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Key take-away

§ Strategic knowledge can transfer between firms when employees move.

§ Mobility can be between firms (inter-firm) or within the same organization, for example, across departments
or units (inter-firm).
§ Employee mobility across organizational boundaries influences strategic performances, as employees
transfer human and relational capital.

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Readings

Core references
Madwsley, J. and Somaya D. (2016) Employee Mobility and Organizational Outcomes: An Integrative
Conceptual Framework and Research Agenda, Journal of Management, 42(1): 85-113.

Supplementary references
Azoulay P. and Lerner J. (2017) Technological Innovation and Organizations. The Handbook of Organizational
Economics, Chapter 14, Princeton University Press (ebook available in the LMU Library)
Starr E., Ganco M. and Campbell B.A. (2018) Strategic Human Capital Management in the Context of Cross-
Industry and Within-Industry Mobility Frictions. Strategic Management Journal, 39: 2226-2254.

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End of Knowledge Spillovers and Employee Mobility | SOD

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