Reaching for the stars: Who pays for talent in innovative industries?

Fredrik Andersson, Matthew Freedman, John Haltiwanger, Julia Lane, Kathryn Shaw

Research output: Contribution to journalArticle

Abstract

Innovative firms need to hire and motivate highly talented workers. This article connects the potential returns to innovation to the structure of compensation for skilled employees. We show that the software firms that operate in software sectors with high potential upside gains to innovation pay more to 'star' workers than do other firms that operate in stable markets. Firms operating in product domains with highly skewed positive returns pay employees more in up-front starting salaries and offer higher compensation growth. The large estimated effects on earnings are robust to the inclusion of a wide range of controls for worker and firm characteristics.

Original languageEnglish (US)
Pages (from-to)F308-F332
JournalEconomic Journal
Volume119
Issue number538
DOIs
StatePublished - 2009

ASJC Scopus subject areas

  • Economics and Econometrics

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