Homeward Bound: How Private Utility Is Tied to Value Creation and Capture

Abstract

In the context of worker–firm complementarities, the extant literature has focused primarily on worker–firm dyads that generate additional revenue for the firm. However, we extend the study of worker–firm complementarities by examining matches that create value through the generation of additional nonpecuniary utility for employees. Through this lens, we hypothesize that mobile employees will receive lower wages to offset the benefits they receive from these nonpecuniary complementarities. Further, we hypothesize that star employees who create unique revenue-generating complementarities receive higher wages than otherwise predicted as they can capture a share of the additional revenue they generate. We test this conceptualization using panel data on all US National Basketball Association players from 2000 to 2009. We demonstrate that NBA players accept lower than predicted wages to play for their home teams which reflects worker utility-generating complementarities. We also show that superstars receive higher than predicted wages to play for their home teams, consistent with firm revenue-generating complementarities.

Citation

Kryscynski, D., Coff, R., Campbell, B.A. and Mallory, B. (2020), "Homeward Bound: How Private Utility Is Tied to Value Creation and Capture", Tzabbar, D. and Cirillo, B. (Ed.) Employee Inter- and Intra-Firm Mobility (Advances in Strategic Management, Vol. 41), Emerald Publishing Limited, Leeds, pp. 271-288. https://doi.org/10.1108/S0742-332220200000041018