Quantity, Variety, or both? “R&D Worker Flows, Diversity, and effects on Technological Performance”

Today’s rapid pace of technological evolution requires organizations to seek swift solutions to acquire the needed skills and talents that are vital to maintain a competitive edge. The reallocation of R&D employees between organizations in particular has attracted the attention of many scholars (for example: Almeida and Kogut, 1999; Agrawal et al., 2006) as this reallocation of workers enables a dynamic rejuvenation of knowledge and social capital in the organization, and consequently plays an important role in furthering the firm’s technological performance (Ettlie, 1980). Given this, organizations are in a continuous hiring and separation loop, generating a flow of R&D workers, in an effort to match the skills they need and those that employees provide, as well as to regenerate ideas and knowledge within the organization. It is thus important to understand the effect of the inbound (i. e. hiring) and outbound (i.e. separation) R&D worker flows on firms’ ability to develop new knowledge. Research on the impact of employee mobility on organizational performance have mostly focused on the performance implications of mobility in terms of quantity (e.g. number of new hires). This extensive literature has provided evidence of a positive relationship between inbound mobility and performance using patent citations as an indicator of knowledge transfer (see for example: Song et al., 2003; Groysberg and Lee, 2010). In that spirit, some studies have also highlighted the negative impact that employees’ separation can have on organizational performance (i.e. rehiring and retraining costs), neglecting the possible reverse knowledge channels that these separated employees can enable (Agrawal et al., 2006). Recent research has in fact suggested that outbound worker flows may have a positive effect on firms’ technological performance (see for example: Somaya et al., 2008; Agrawal et al., 2006). While these studies provide important insights regarding the performance implications of the mobility of employees, they have focused on the levels of either the inbound or the outbound worker flows, assumed a rather linear relationship between mobility and performance, and ignored the composition of these flows. As organizations tend to observe worker flows in both directions simultaneously (i.e. inbound and outbound), and as these worker flows are likely to be characterized by different degrees of heterogeneity in their skills and experiences (Somaya, et al., 2008), the potential firm gains from new hires and/or separations may depend on both the levels and composition of these flows. Focusing merely on either the inbound or the outbound flows, and most importantly neglecting the composition of these flows, may provide a partial understanding of the effects of the R&D workers flows on the firm. Building on the organizational innovation, and the labor mobility literatures, we conceptualize the effect of R&D worker flows on firms’ ability to develop new technological knowledge as the result of the level, composition and direction of these flows. We first argue that the levels of inbound and outbound worker flows may, through different mechanisms, influence the technological performance of firms, and then, that this effect is accentuated by the degree of diversity of these flows. We then test these expectations using biannual data on 6350 firm-year observations on French firms involved in R&D activities between 2007 and 2013. Our findings suggest that the levels of inbound and outbound R&D worker flows have a positive impact on organizations’ patenting activities, but only up to a threshold after which, increases in the levels of worker flows engenders a negative effect. At low levels of R&D worker flows a diverse composition of these flows improves performance, while it negatively affects performance at high levels, accentuating the complexity and management costs resulting from the reorganization of working teams. This study contributes to current research on labor mobility, knowledge diffusion, and organizational innovation by showing, first, how the firm’s technological performance responds to different levels of new hires and exits, and second, how the levels and diversity of these hires and exits interact to influence the firm’s performance. Our results have practical implications to the firm with respect to managing the levels of inbound and outbound workers’ flows, as well as to balancing the levels and diversity of these flows. Quantity, Variety, or both? “R&D Worker Flows, Diversity, and effects on Technological Performance” Fakher Omezzine Grenoble Ecole de Management, France Fakher.omezzine@grenoble-em.com Isabel-Maria Bodas-Freitas Grenoble Ecole de Management, France Isabel-maria.bodas-freitas@grenoble-em.com