Fix Pay Gaps to Boost R&D

Mar 10, 2018
Management and Organization

Women Leading Research: Waverly W. Ding

SMITH BRAIN TRUST – Companies that want to boldly go into new knowledge domains should start by looking inward at compensation design. A working paper co-authored by management professor Waverly W. Ding at the University of Maryland’s Robert H. Smith School of Business shows that large pay gaps among research and development professionals at the same job level within an organization can stifle exploratory innovation — the kind that leads to U.S. patent filings.

Unlike exploitative innovation, which involves incremental improvements and refinements, exploratory innovation requires close collaboration among boundary spanners from multiple backgrounds. “Breaking through into new domains where the firm has not previously traveled requires knowledge heterogeneity,” Ding says. “It also requires appetite for risk because of the uncertainties involved.”

Paying R&D professionals unequal amounts for similar work can sap team spirit and trigger complaints about inequity, especially if the gaps appear arbitrary. The effects are less pronounced at companies with older R&D employees on average or at firms with greater age variance.

Unlike past innovation studies, which have explored the effects of executive compensation design, Ding and her co-authors focus on pay gaps among rank-and-file R&D personnel at 81 high technology firms in the United States over a six-year period.

“Setting research direction is no longer the sole responsibility of top executives,” Ding says. “Beginning in the late 1980s, industrial research has become more decentralized.”

At the same time, U.S. firms have become less hierarchical and more flexible in structure and management. Companies such as 3M and Google even allow engineers to devote a fraction of their work time to projects of their own choosing, even if the projects are not directly related to any immediate corporate goals.

“These trends suggest an expanding role in knowledge creation played by R&D employees below the senior ranks,” Ding says.

Read more: Exploratory Innovation in Technology Firms: The Role of Compensation Structure for R&D Workforce is a working paper by Victor Cui at the University of Manitoba, Waverly W. Ding at the Smith School, and Yoshio Yanadori at the University of South Australia.

Waverly W. Ding is associate professor of management and organization at the University of Maryland’s Robert H. Smith School of Business.

Research interests: High-tech entrepreneurship and strategy; knowledge transfer among universities and industrial firms; the U.S. biotech industry; labor productivity in science and technology.

Selected accomplishments: 2017-2018 University of Virginia Batten Institute Entrepreneurship Fellow; 2009-2011 Kauffman Foundation Junior Faculty Fellowship in Entrepreneurship Research (one of five inaugural recipients selected among entrepreneurship researchers in the United States); 2008-2009 UC Berkeley Haas School of Business Schwabacher Award; 2007-2009 Kauffman Foundation Entrepreneurship Research Mini-Grant; 2006 UC Berkeley Regents’ Junior Faculty Fellowship; 2002 Kauffman Foundation Emerging Scholars Initiative Dissertation Research Grant.

About this series: The Smith School faculty is celebrating Women’s History Month 2018 in partnership with ADVANCE, an initiative to transform the University of Maryland by investing in a culture of inclusive excellence. Daily faculty spotlights support activities from the school’s Office of Diversity Initiatives, starting with the seventh annual Women Leading Women forum on March 1, 2018.

Other fearless ideas from:  Rajshree Agarwal  |  Ritu Agarwal  |  T. Leigh Anenson  |  Kathryn M. Bartol  |  Christine Beckman  |  Margrét Bjarnadóttir  |  M. Cecilia Bustamante  |  Jessica M. Clark  |  Rellie Derfler-Rozin  |  Waverly Ding  |  Wedad J. Elmaghraby  |  Rosellina Ferraro  |  Rebecca Hann  | Amna Kirmani  |  Hanna Lee  |  Hui Liao  |  Jennifer Carson Marr  |  Wendy W. Moe  |  Courtney Paulson  |  Louiqa Raschid  |  Rebecca Ratner  |  Debra L. Shapiro  |  M. Susan Taylor  |  Niratcha (Grace) Tungtisanont  |  Vijaya Venkataramani  |  Janet Wagner  |  Yajin Wang  |  Yajun Wang  |  Liu Yang  |  Jie Zhang  |  Lingling Zhang

Photo credit: turgaygundogdu



About the Expert(s)

Waverly Ding is Associate Professor of Management & Organization at the University of Maryland's Robert H. Smith School of Business. Dr. Ding earned her MBA and Ph.D. in business from the University of Chicago. Prior to joining the Smith School faculty, she was an assistant professor at Haas School of Business, the University of California at Berkeley. Dr. Ding's research focuses on high-tech entrepreneurship and strategy, knowledge transfer between universities and industrial firms, and the U.S. biotech industry. She has also conducted research relating to labor force in science and technology. Her work has been published in Science, American Journal of Sociology, Management Science, Journal of Industrial Economics, and Research Policy.

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