Dynamic value sharing based on employee contribution as a competitiveness-enhancing device

Abstract

As the era of the knowledge economy has firmly established itself, the ability of firms to attract, motivate, and retain talents in order to realize stable and sustainable value creation, is increasingly critical. This paper proposes a dynamic value-sharing mechanism (DVS), based on human capital contribution, which combines the advantages of distribution fairness and dynamicity, to enhance firm value and profitability. As an instrument of analysis, this paper uses evolutionary game theory to study the feasibility of DVS and analyzes the impacts of key factors on the dynamic evolution game process and result. Evolutionary results show that: (1) DVS has the function of screening high-capability employees, and the high-capability employees ultimately dominate the value sharing under this mechanism; (2) DVS more stably promotes value creation, and the firm’s value increases to a greater extent than it would do without this mechanism and in the traditional static value sharing (SVS) model; (3) enterprises with a high proportion of talented employees have inherent advantages in implementing DVS, such as those involved in high-tech industries; and (4) the relationship between the ratio of overall profit sharing and the time of evolution to equilibrium is non-monotonic.