Employee Mobility, Employee Entrepreneurship, and Employee Value Capture: Labor Market Frictions and the Impact of Social Comparison Costs on Compensation

Abstract

Strategic human capital research explores heterogeneity in firm performance

based on differences in firms’ abilities to leverage human capital. Much of the discussion

in this literature focuses on how firms can exploit isolating mechanisms that limit the

mobility of employees. This dissertation studies two important facets of strategic human

capital research related to the mobility of employees. The first essay explores how a

labor market frictions lens can connect the strategic human capital literature to the

employee entrepreneurship literature, two complementary but largely disparate

literatures. The examination of the impact of various labor market frictions on employee

mobility to competitor firms and employee transitions to entrepreneurship suggests that

the outcomes of some frictions are divergent across the two literatures, the outcomes of

some are aligned, and the outcomes of some are ambiguous. The complex interplay of

labor market frictions provides opportunities for future research specifically exploring the

intersection of the strategic human capital and employee entrepreneurship literatures.

The second essay of explores how multi-location firms facilitate the spread of

compensation increases across labor markets. Prior research cites the threat of employee

mobility as the primary mechanism for the spread of compensation increases across

locations. Multi-location firms that straddle more than one labor market, however, must

manage employees across labor markets. I propose that internal firm processes, including

social comparison between employees of the firm in different locations, may lead firms to

raise compensation for employees in other locations when addressing competitive

pressure in a given location. In doing so, these multi-location firms put pressure on local

labor market competitors to also raise compensation, leading to compensation increases

across distinct labor markets without reference to mobility constraints that dominate the

strategic human capital literature.