Shai Bernstein is an associate
professor of finance and Timothy
McQuade is an assistant professor
of finance at Stanford GSB.
It’s no secret that economic insecurity can
wreak havoc on a person’s bank account,
household wealth, and state of mind. But
a recent study concludes that uncertainty in
the economy can leave in its wake another
victim: innovation among lower-level
employees at technology companies.
The working paper (“Does Economic
Insecurity Affect Employee Innovation?”)
by professors Shai Bernstein and Timothy
McQuade at Stanford Graduate School of
Business — together with Richard Townsend
at the University of California, San Diego
— also finds that the effects of an economic
slump are more pronounced among
employees who had little equity in their
homes before the crisis began and therefore
fewer buffers to help weather the economic
storm and avoid mortgage default.
“It was eye-opening to explore the effects
of widespread disruptions in the housing
market,” Bernstein says. “When confidence
in household wealth collapsed, creativity
suffered as well.”
PRODUC TIVI T Y
Workers who worry about declining household
wealth are less likely to explore fresh ideas.
BY MATT VILLANO
Photograph by Matt Edge