Strategic Human Capital And Entrepreneurship

This dissertation consists of three self-contained chapters on strategic human capital and entrepreneurship and explores the causal impacts of specific perks, benefits, and compensation structures on worker behavior and venture outcomes. Chapter 1 addresses a popular trend in technology companies and startups of offering unlimited vacation as an employee perk. I examine whether unlimited vacation benefits firms, the mechanisms, and the contingencies based on organizational conditions in three empirical settings. Using a combination of text analysis of online reviews, difference-in-differences regression of archival data at a high-tech company, and randomized controlled experiments with online workers, I find that the perk leads to more vacation time, higher subjective productivity, and increased overall labor efficiency. These effects involve multiple mechanisms (sorting, productivity, and engagement) and are contingent on social dynamics, bundled HR practices, and the culture for punishing under-performance. Chapter 2 shifts the focus from industry trends in firm HR practices to institutional changes that affect employees’ access to benefits. Through a difference-in-differences design, I examine how employees’ access to the New Jersey Paid Family Leave program impacts the profitability of new ventures. I find that the program adversely affects the likelihood of making profits for the average new venture. The negative effect is stronger for businesses in greater financial stress and with more reliance on incumbent employees. Innovative ventures, however, are more likely to be profitable post treatment. Chapter 3, joint with Andy Wu, links worker preferences to compensation structure to explain why the distribution of equity compensation is more equal than that of salary in many startups. We propose that workers have different equality preferences for different types of payoffs and test our predictions in an experimental group production game. Results suggest that workers view salary and equity in two separate domains, and they are more inequality averse in the equity domain, implying that firms could benefit from a compensation structure that is more equitable in the equity portion. Furthermore, we find a presentation effect: separation of the two domains is triggered only when equity is shown in a different percentage form from the absolute form of salary.