Management Accounting Section Midyear Meeting

How Does Supplemental Employment Impact Primary Employment?

• In Event: Monitoring and Incentives (Archival)

Abstract

Firms often allow their employees to engage in supplemental employment as long as there is no conflict of interest with the primary employment. Using data from the sport of cricket which introduced the opportunity of league-based contractual employment in 2008, we analyze how engaging in supplemental employment may impact employee performance in primary employment. We find that when the underlying tasks across the two employments are similar, supplemental employment is complementary for agents specializing in that task. Additionally, specialists and star employees are also able to adapt more quickly to different requirements across jobs. However, for non-specialist employees, supplemental employment can have negative spillover effects on primary employment, giving rise to the classic common agency problem. While agents may respond to financial incentives by presenting themselves as desirable candidates for supplemental employment, managerial controls can significantly reduce the possibility of moral hazard.

Author

• Hashim Zaman, Harvard University Business School