Executive Compensation: Fat Cats and Best Athletes

Jerry W. Kim, Bruce Kogut, and Jae-Suk Yang

The income gains in the top 1 percent is the primary cause for the rapid growth in U.S. inequality since the late 1970s. Managers and executives of firms account for a large proportion of these top earners. Chief executive officers (CEOs) in particular have seen their compensation increase faster than the growth in firm size. We propose that contagion of changes in social norms was mediated through a process of social comparison within localized networks, propagating higher pay among corporate executives. By analyzing this increase in pay as a diffusion process, this paper compares three candidate explanations for contagion: director board interlocks, peer groups, and educational networks. After accounting for endogeneity, the statistical results indicate that board of director and peer group networks facilitate social comparisons that generate the observed pay patterns. A key implication is that exogenous shocks such as the Internet boom provided a shock that re-set the norms of what constitutes fair pay, instigating a process of social comparison within networks, ultimately resulting in the diffusion of high pay for CEOs.

American Sociological Review, 80(2):299-328

Seeing Stars: Matthew Effects and Status Bias in Major League Baseball Umpiring

Jerry W. Kim and Brayden G. King

This paper tests the assumption that evaluators are biased to positively evaluate high status individuals, irrespective of quality. Using unique data from Major League Baseball umpires’ evaluation of pitch quality, which allow us to observe the difference in a pitch’s objective quality and in its perceived quality as judged by the umpire, we show that umpires are more likely to over-recognize quality by expanding the strike zone, and less likely to under-recognize quality by missing pitches in the strike zone for high status pitchers. Ambiguity and the pitcher’s reputation as a “control pitcher” moderate the effect of status on umpire judgment. Further, we show that umpire errors resulting from status bias lead to actual performance differences for the pitcher and team.

Management Science, 2014, 60(11) p.2619-2644. (Lead Article)

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Innovation, Strategy, and Hypercompetition

Rita Gunther McGrath and Jerry Kim

From the perspective of the field of strategic management, innovation has traditionally been regarded as tangential to the primary concerns of the field. Strategy sought to understand how firms might achieve a sustainable competitive advantage, or long period of out-performance relative to a comparison set. With the advent of hypercompetition, in which competitive advantages are transient, an increasing amount of economic activity does not reflect the assumptions of either the industrial organization stream of strategy research or even the more recent firm-focused resource or capabilities-based view. Specific implications for integrating an innovation perspective in strategy research include new approaches to measuring performance; a new focus for strategy analysis that considers firms within networks of individuals and other organizations; and a new role for general managers. Ironically, our research suggests that strategy may well benefit by returning to its traditional roots as a field that searches for answers relevant to general managers.

The Oxford Handbook of Innovation Management (2014): 397-419

Arbiter of Science: Institutionalization and Status Effects in FDA Review, 1990- 2004

Jerry W. Kim

In this article the author proposes that firm status has a significant effect on the regulatory evaluation process. Regulators rely on external signals of quality such as status to resolve uncertainty, and the tendency to be infused with ‘value beyond the technical requirements of the task at hand’ (Selznick, 1957) causes status positions in institutionalized domains to be particularly salient. Using review times for 839 New Drug Applications approved by the Food and Drug Administration between 1990 and 2004, the author finds that firms with higher status in the scientific knowledge domain receive faster approval for their drugs. The effect of status strengthened when products address underserved disease areas, and when following a major product withdrawal in the industry. Status in areas unrelated to the therapy category had a stronger effect on approval speed than therapy-specific status, implying that status effects are driven by values in addition to technical concerns.

Strategic Organization, 10, (2012): 128-157

University Patenting and Scientific Productivity: Comment

Jerry W. Kim

The increasing commercialization of academic science has generated concerns that this trend will negatively affect the research focus and productivity of academic scientists. Breschi et al. analyze a longitudinal data set of Italian academic inventors to empirically examine the impact of patenting on university professors’ scientific productivity. They find that academic inventors actually increase their productivity and quality of scientific research post-patenting. This comment considers the social mechanisms that produce the article’s key findings, and explore the broader implications for universities and public policy.

Where Do Alliances Come From? The Effects of Upper Echelons on Alliance Formation

Jerry W. Kim and Monica C. Higgins

Alliances with established organizations provide young firms with resources necessary for survival. We build on recent organizational research examining the effect of upper echelons on attracting powerful intermediaries to understand how young biotechnology firms establish alliances with established organizations. Drawing upon the concept of homophily, we test hypotheses regarding the extent to which young firms and partners match along specific homophily dimensions. Our findings from an event-history analysis of 3,200 career histories of managers who took biotechnology firms public between 1979 and 1996 show that alliance formation is related to status homophily and role-based homophily between young and established organizations.

Research Policy, 36, 2007: 499-514

Extending the Faultline Concept to Geographically Dispersed Teams: How Colocated Subgroups Can Impair Group Functioning

Jeffrey T. Polzer, C. Brad Crisp, Sirkka L. Jarvenpaa and Jerry W. Kim

We theorize that in geographically dispersed teams, members’ geographic locations are likely to activate “faultlines” (hypothetical dividing lines that split a group into subgroups) that impair team functioning. In a study of 45 teams comprised of graduate students from 14 schools in ten countries, we found that geographic faultlines heightened conflict and reduced trust. These faultlines were stronger when a team was divided into two equally sized subgroups of colocated members and when these subgroups were homogeneous in nationality.

Academy of Management Journal, 49, (2006): 679-692