Firms increasingly support employee‐led startups by providing funding in exchange for equity. These investments create a dual role for employees, who pursue their entrepreneurial ventures as shared residual claimants while continuing to work on core tasks under incomplete fixed‐pay contracts. Although the investments align incentives within the startup, their effects on employees' effort in their core roles remain unclear. Using an experimental economics approach, I examine how a firm's investment decision affects employees' effort on core tasks. To isolate what is unique about equity investments, I use a non‐equity gift of equal monetary value as the baseline. The results show that employees reduce effort more when the firm denies a non‐equity gift than when it denies an equity investment. This difference arises because employees view a denied equity investment as the firm's business judgment based on risk and expected return, rather than as a failure to act generously. When funding in either form is provided, employees reciprocate positively, resulting in similarly high effort. Overall, the findings suggest that equity‐based entrepreneurship programs can help motivate effort on both startups and core tasks while mitigating the harm of rejecting employees' proposals.

Professional development and training are essential for organizational growth and success, but resource constraints often force managers into a dilemma: Should they train their lower performing or higher performing employees? While lower performers with greater skill gaps can benefit more from training than higher performers, managers must also consider employees’ fairness concerns. Using an interactive experiment, we predict and find that how employees react to their manager's allocation of training resources depends on the prevailing fairness norms in the work environment. When egalitarian norms dominate, such as when employees have little control over their job tasks, lower performers take the receipt of resources for training for granted and react negatively when the manager allocates those resources to higher performers instead. In contrast, when meritocratic norms dominate, such as when employees have more control over their job tasks, higher performers react more negatively than lower performers to not receiving training resources. Additional experiments suggest that these fairness‐norm–dependent reactions are most pronounced under tournament incentives and may disappear under individual performance‐based pay. Overall, our study highlights the importance for managers to consider both employee productivity and the prevailing fairness norms of the work environment when allocating scarce training resources.