Assessing star value: The influence of prior performance and visibility on compensation strategy

Abstract

The greatest competition among rivals in many industries is not for market share but human capital. In the so-called talent war, organisations compete aggressively to attract star employees—individuals with disproportionate productivity and external visibility—in pursuit of competitive advantage. Building on human capital and resource-based view theories, we argue that firms' compensation strategies are influenced by the intangible assets that define stars. With data from Major League Baseball, we find that organisations are likely to pay higher wages to stars based on their prior performance and visibility. Furthermore, our data indicate that firm competitive position influences which of these intangible assets holds greater value for managers. We discuss the implications of these findings for organisations waging a war for talent and suggest directions for future research on a matter that is far from over.