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ABS researcher Vilma Chila (Entrepreneurship and Innovation section) carried out a study on how a firm’s policy of offering stock options to employees influences employee departures to other firms and prompts some employees to strike out on their own.
Dr Vilma Chila
Dr Vilma Chila

Stock options are offered as incentives to increase productivity and to retain employees. Chila's study The effects of firm-specific incentives (stock options) on mobility and employee entrepreneurship was conducted with Tilburg University researcher Shivaram Devarakonda. Their work was recently published in the Journal of Business Venturing.

Incentives and entrepreneurship

Their findings appear to show that offering stock options to non-executive staff influences both the levels of employees who leave for other firms, and to entrepreneurship. The stock option incentive reduce the rate at which employees leave to join new firms. But surprisingly, this incentive also promoted employee entrepreneurship. Chila: ‘Our theory is that employee stock options induce employees to experiment, but firms face constraints in adopting the resulting ideas. This prompts frustrated employees to pursue their ideas in their own ventures’.
These conclusions offer interesting perspectives on firm-specific incentives and human capital management. Chila's research also sheds light on how organisational conditions can initiate entrepreneurship.