Accounting & Management

- 2023
- Article
Incentive Contract Design and Employee-Initiated Innovation: Evidence from the Field

By: Wei Cai, Susanna Gallani and Jee-Eun Shin

This study examines how the design of incentive contracts for tasks defined as workers’ official responsibilities (i.e., standard tasks) influences workers’ propensity to engage in employee-initiated innovation (EII). EII corresponds to innovation activities that are not formally assigned to workers but are nonetheless encouraged and considered important for the company's success. We leverage field data obtained from a manufacturing company that uses a dedicated information system to track workers’ EII idea submissions. We find theory-consistent evidence that, compared to workers receiving fixed pay, employees rewarded for their standard tasks with variable compensation contracts exhibit a lower propensity to engage in EII. This result is particularly evident when we consider innovation ideas narrowly focused on the standard task (i.e., narrow-scope ideas) versus ideas benefiting other constituents and activities beyond the proponents’ standard task (i.e., broad-scope ideas). Our findings suggest that variable pay narrows employees’ conceptual focus around the standard task and hinders employee engagement in broad-scope innovation activities compared to fixed compensation contracts. We contribute to the nascent literature on incentives for employee-initiated innovation and to the growing stream of research examining the determinants of different types of innovation.
- 2023
- Article
Incentive Contract Design and Employee-Initiated Innovation: Evidence from the Field

By: Wei Cai, Susanna Gallani and Jee-Eun Shin

This study examines how the design of incentive contracts for tasks defined as workers’ official responsibilities (i.e., standard tasks) influences workers’ propensity to engage in employee-initiated innovation (EII). EII corresponds to innovation activities that are not formally assigned to workers but are nonetheless encouraged and considered...
- March 2023
- Case
Ownership Works: Scaling a Profitable Social Mission

By: Ethan Rouen, Dennis Campbell and Andrew Robinson
- March 2023
- Case
Ownership Works: Scaling a Profitable Social Mission

By: Ethan Rouen, Dennis Campbell and Andrew Robinson
- March 20, 2023
- Article
Can Twitter Be a Force for Good? Social Media Helps Curb Corporate Misconduct

By: Jonas Heese and Joseph Pacelli
- March 20, 2023
- Article
Can Twitter Be a Force for Good? Social Media Helps Curb Corporate Misconduct

By: Jonas Heese and Joseph Pacelli

About the Unit

The Accounting & Management unit at Harvard Business School strives to be the worldwide leader in research, course development, and teaching on top managements' use of performance measurement systems to:

Communicate with external investors to ensure that their firms' securities are fairly priced and that they are able to access capital,
Measure and evaluate their firms' economic performance,
Improve resource allocation and strategy implementation within their firms, and
Build accountability for performance through effective external and internal governance.

Unit research, course development, and teaching fall into two broad areas: Financial Reporting and Analysis and Management Accounting. Our research helps scholars and educators understand current best practices for the design and use of performance measurement systems that help managers to build more effective, value-creating organizations. Our teaching materials enable us to bring the results of this research into the classroom, and to practice.

Recent Publications

Incentive Contract Design and Employee-Initiated Innovation: Evidence from the Field

By: Wei Cai, Susanna Gallani and Jee-Eun Shin

2023 |
Article |
Contemporary Accounting Research

This study examines how the design of incentive contracts for tasks defined as workers’ official responsibilities (i.e., standard tasks) influences workers’ propensity to engage in employee-initiated innovation (EII). EII corresponds to innovation activities that are not formally assigned to workers but are nonetheless encouraged and considered important for the company's success. We leverage field data obtained from a manufacturing company that uses a dedicated information system to track workers’ EII idea submissions. We find theory-consistent evidence that, compared to workers receiving fixed pay, employees rewarded for their standard tasks with variable compensation contracts exhibit a lower propensity to engage in EII. This result is particularly evident when we consider innovation ideas narrowly focused on the standard task (i.e., narrow-scope ideas) versus ideas benefiting other constituents and activities beyond the proponents’ standard task (i.e., broad-scope ideas). Our findings suggest that variable pay narrows employees’ conceptual focus around the standard task and hinders employee engagement in broad-scope innovation activities compared to fixed compensation contracts. We contribute to the nascent literature on incentives for employee-initiated innovation and to the growing stream of research examining the determinants of different types of innovation.

Keywords: Employee-initiated Innovation; Contract Design; Rank-and-file; Extra-role Behaviors; Compensation and Benefits; Motivation and Incentives; Innovation and Management

Citation

Find at Harvard

Purchase

Ownership Works: Scaling a Profitable Social Mission

By: Ethan Rouen, Dennis Campbell and Andrew Robinson

March 2023 |
Case |
Faculty Research

Citation

Educators

Can Twitter Be a Force for Good? Social Media Helps Curb Corporate Misconduct

By: Jonas Heese and Joseph Pacelli

March 20, 2023 |
Article |
Promarket

Keywords: Social Media; Corporate Accountability

Citation

Read Now

Emory Healthcare on the Front Lines of the Nursing Workforce Crisis

By: Susanna Gallani, Karen L. Sedatole and Sarah Mehta

March 2023 |
Case |
Faculty Research

Citation

Educators

Hikma Pharmaceuticals Governance Journey

By: Suraj Srinivasan and Jonah Goldberg

March 2023 |
Teaching Note |
Faculty Research

Teaching Note for HBS Case No. 318108. The case opens with Said Darwazah, chairman and CEO of Hikma Pharmaceuticals, the multinational generics company, anticipating the company’s 2017 AGM and reflecting on changes made over the previous year to address concerns expressed by proxy advisors and some shareholders about Hikma’s reliance on a combined chairman/CEO position, the long tenure of some directors, and the company’s approach to executive pay. The case describes Hikma’s origins as a Jordanian pharma company founded by Darwazah’s father in 1978 and traces the evolution of its governance as a private family company, then as a publicly traded company listed on the London Stock Exchange in 2005, and finally as a member of the FTSE 100, beginning in March 2015. Ahead of the 2017 AGM, Darwazah is confident that shareholders will approve changes made to the company’s executive incentive plan (EIP) and steps taken to accelerate the turnover of long-serving directors, but he wonders how much longer the company will be able to continue with a combined chairman/CEO and, more generally, how to marry the high level of governance expected by shareholders with the entrepreneurial spirit that had driven Hikma’s growth and development.

Keywords: Jordan; Emerging Market; Private Sector; For-profit Firms; Boards Of Directors; Pharmaceuticals; Remuneration; Shareholder Engagement; Corporate Governance; Governing and Advisory Boards; Business and Shareholder Relations; Executive Compensation; Business Growth and Maturation; Pharmaceutical Industry; Jordan

Citation

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Sustainability Reporting at Dollar Tree, Inc.

By: Suraj Srinivasan and Li-Kuan Ni

March 2023 |
Teaching Note |
Faculty Research

Teaching Note for HBS Case No. 122-044. The case discusses the ESG strategy of Dollar Tree Inc., a U.S. Fortune 500 company in the deep discount retail industry and the shareholder pressure faced by the company. In 2022, the company faced a shareholder resolution from renowned shareholder advocacy group As You Sow for the company to better mitigate and report on the climate risks faced by the business. The resolution challenged the company to intensify its climate transition plans and adopt a “net-zero” emission goal. A 2020 shareholder resolution at the company by a different shareholder received record-breaking support that had already caused the company to revamp its sustainability initiatives. This case provides an overview of Dollar Tree’s business, the recent landscape of sustainability reporting and shareholder ESG resolutions in the U.S., and the narrative of management opposition to the resolutions. Overall, the case captures the interactions between environmental shareholder activism, corporate management and those charged with governance, especially the board of directors. This case is useful for students to discuss recent trends of ESG-related shareholder activism, sustainability reporting especially related to environmental issues, climate governance and how companies are reacting to them.

Keywords: ESG; Sustainability; Shareholder Activism; Dollar Tree; Sustainability Reporting; ESG Reporting; Board Of Directors; Shareholder Engagement; GHG; Environmental Accounting; Integrated Corporate Reporting; Trends; Communication; Announcements; Voting; Environmental Management; Climate Change; Environmental Sustainability; Values and Beliefs; Corporate Accountability; Corporate Disclosure; Corporate Governance; Governing Rules, Regulations, and Reforms; Policy; Reports; Business or Company Management; Risk Management; Corporate Social Responsibility and Impact; Outcome or Result; Strategic Planning; Business and Stakeholder Relations; Situation or Environment; Opportunities; Civil Society or Community; Social Issues; Public Opinion; Strategy; Adaptation; Alignment; Business Strategy; Corporate Strategy; Value Creation; Retail Industry; United States; Virginia

Citation

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Northvolt: Building Batteries to Fight Climate Change

By: Debora L. Spar, Georgios Serafeim and Julia Comeau

March 2023 |
Teaching Note |
Faculty Research

Keywords: Batteries; Green Technology; Social Responsibility; Green Technology Industry; Sweden; Europe

Citation

Ransomware at Springhill Medical Center

By: Suraj Srinivasan and Li-Kuan Ni

March 2023 |
Teaching Note |
Faculty Research

In July, 2019, Springhill Medical Center (“SMC”) in Mobile, Alabama fell prey to a malicious ransomware attack that crippled the hospital’s internal network systems and public-facing web page. While the hospital rushed to securely restore the network, medical personnel scrambled workarounds to continue medical services. Amidst the chaos, a baby was born in the hospital with umbilical cord wrapped around her neck that had resulted in severe brain injury and died nine months later. The mother and family sued SMC, alleging the hospital failed to inform her of the cyber incident, which she believed had compromised the quality of care and led to an otherwise preventable tragedy. The case discusses the important questions of how SMC had responded to the ransomware attack and how hospitals and other organizations should treat the ever-increasing threat of cyber breaches.