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Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students

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Author Info

  • Claude Montmarquette

    ()
    (CIRANO, and University of Montréal, 2020 University Street, Montréal, Québec, Canada H3A 2A5)

  • Jean-Louis Rullière

    ()
    (GATE (CNRS, University of Lumiere, Lyon 2, Ecole Normale Supérieure), 93 chemin des Mouilles, 69130 Ecully, France)

  • Marie-Claire Villeval

    ()
    (GATE (CNRS, and University of Lumiere, Lyon 2, Ecole Normale Supérieure), 93 chemin des Mouilles, 69130 Ecully, France, and IZA (Institute for the Study of Labor), Bonn, Germany)

  • Romain Zeiliger

    ()
    (GATE (CNRS, University of Lumiere, Lyon 2, Ecole Normale Supérieure), 93 chemin des Mouilles, 69130 Ecully, France)

Abstract

After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits, and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real task experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance, but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven, while students are more cost driven.

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File URL: http://dx.doi.org/10.1287/mnsc.1040.0280
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 50 (2004)
Issue (Month): 10 (October)
Pages: 1379-1389

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Handle: RePEc:inm:ormnsc:v:50:y:2004:i:10:p:1379-1389

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Keywords: executive and team-based compensation; subject pool effects; real task experiment; incentives; sorting; mergers;

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References

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Citations

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Cited by:
  1. Brice Corgnet, 2009. "Peer Evaluations and Team Performance: When Friends Do Worse Than Strangers," Faculty Working Papers 12/09, School of Economics and Business Administration, University of Navarra.
  2. Brice Corgnet & Roberto Hernán-González & Eric Schniter, 2013. "Why Real Leisure Really Matters: Incentive Effects on Real Effort in the Laboratory," Working Papers 13-22, Chapman University, Economic Science Institute.
  3. Waichman, Israel & Requate, Till & Siang, Ch'ng Kean, 2008. "Managers and Students Playing Cournot: Experimental Evidence from Malaysia," Economics Working Papers 2008,19, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Marie-Claire Villeval & David Dickinson, 2004. "Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theories," Working Papers 0409, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  5. Sloof, Randolph & van Praag, C. Mirjam, 2010. "The effect of noise in a performance measure on work motivation: A real effort laboratory experiment," Labour Economics, Elsevier, vol. 17(5), pages 751-765, October.
  6. Gächter, Simon & von Krogh, Georg & Haefliger, Stefan, 2010. "Initiating private-collective innovation: The fragility of knowledge sharing," Research Policy, Elsevier, vol. 39(7), pages 893-906, September.
  7. Simon Gaechter & Georg von Krogh & Stefan Haefliger, 2006. "Private-Collective Innovation and the Fragility of Knowledge Sharing," Discussion Papers 2006-21, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  8. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
  9. Corgnet, Brice & Sutan, Angela & Veszteg, Róbert F., 2011. "My teammate, myself and I: Experimental evidence on equity and equality norms," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 347-355, August.

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