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The impact of group incentives on performance of small firms: Hausman-Taylor estimates

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  • Kshitija Dixit

    (Med Health Care and Decor Pvt. Ltd., Pune, India)

  • Rupayan Pal

    (Indira Gandhi Institute of Development Research (IGIDR), Mumbai, India)

Abstract

This paper investigates the impact of group incentives on firms' performance. It shows that group incentive raises firms' performance. This result empirically validates the implication of the theoretical literature that performance-related pay can potentially improve firms' performance, in the context of a developing country, and indicates the importance of group incentives in small firms. It also shows that partnership firms perform better than private limited companies and labour unions have a negative impact on firms' performance. It employs the Hausman-Taylor random effects estimator in order to isolate the effects of time-invariant covariates and also to tackle potential endogeneity problem. Copyright © 2010 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1494
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 31 (2010)
Issue (Month): 6 ()
Pages: 403-414

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Handle: RePEc:wly:mgtdec:v:31:y:2010:i:6:p:403-414

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June.
  2. Peter Egger & Michael Pfaffermayr, 2001. "Distance, Trade and FDI: A Hausman-Taylor SUR Approach," WIFO Working Papers 164, WIFO.
  3. FitzRoy, Felix R & Kraft, Kornelius, 1986. "Profitability and Profit-Sharing," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 113-30, December.
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  6. Kraft, Kornelius, 1991. "The Incentive Effects of Dismissals, Efficiency Wages, Piece-Rates and Profit-Sharing," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 451-59, August.
  7. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
  8. Knez, Marc & Simester, Duncan, 2001. "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 743-72, October.
  9. Baltagi, Badi H & Khanti-Akom, Sophon, 1990. "On Efficient Estimation with Panel Data: An Empirical Comparison of Instrumental Variables Estimators," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 401-06, Oct.-Dec..
  10. Debashish Bhattacherjee, 2005. "The Effects of Group Incentives in an Indian Firm: Evidence from Payroll Data," LABOUR, CEIS, vol. 19(1), pages 147-173, 03.
  11. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
  12. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. (*), Nigel Rice & Paul Contoyannis, 2001. "The impact of health on wages: Evidence from the British Household Panel Survey," Empirical Economics, Springer, vol. 26(4), pages 599-622.
  14. Edward P. Lazear, 1999. "Output-based Pay: Incentives or Sorting?," NBER Working Papers 7419, National Bureau of Economic Research, Inc.
  15. repec:lan:wpaper:3982 is not listed on IDEAS
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