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Why are Small Firms Different? Managers’ Views

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  • Jonas Agell

Abstract

Do incentives in small organizations differ from those in large ones? This paper uses a representative survey of compensation managers to shed light on the issues. I find that (i) small establishments rely less on pecuniary incentives, and have a significantly more hostile attitude towards incentive schemes based on competition and relative rewards; (ii) large units are more vulnerable to mechanisms of efficiency wages, effects that remain even as I control for differences in monitoring ability; (iii) large units are more prone to indicate that negative reciprocity is important, and that their employees care about relative pay. I argue that these findings fit with behavioral stories of incentives and motivation, in particular those stressing group interaction effects, inequity aversion and gift exchange.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1076.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1076

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Keywords: -size effect; motivation; relative pay; field-survey; matched data;

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References

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Cited by:
  1. Pedro Rey-Biel, 2007. "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
  2. HansK. Hvide, 2009. "The Quality of Entrepreneurs," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(539), pages 1010-1035, 07.
  3. Ana Ferrer & Stephanie Lluis, . "Should Workers Care About Firm Size?," Working Papers, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) 0204, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  4. Dur, Robert & Non, Arjan & Roelfsema, Hein, 2010. "Reciprocity and incentive pay in the workplace," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(4), pages 676-686, August.
  5. Carlsson, Fredrik & Johansson-Stenman, Olof, 2009. "Voting Motives, Group Identity, and Social Norms," Working Papers in Economics, University of Gothenburg, Department of Economics 366, University of Gothenburg, Department of Economics.
  6. Cordes, Christian & Richerson, Peter J. & Schwesinger, Georg, 2010. "How corporate cultures coevolve with the business environment: The case of firm growth crises and industry evolution," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 76(3), pages 465-480, December.
  7. Johansson-Stenman, Olof, 2008. "Who are the trustworthy, we think?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 68(3-4), pages 456-465, December.
  8. Aronsson, Thomas & Johansson-Stenman, Olof, 2011. "Animal Welfare and Social Decisions," Working Papers in Economics, University of Gothenburg, Department of Economics 485, University of Gothenburg, Department of Economics.
  9. Englmaier, Florian & Wambach, Achim, 2005. "Optimal Incentive Contracts under Inequity Aversion," IZA Discussion Papers 1643, Institute for the Study of Labor (IZA).
  10. James Zuccollo & Sholeh Maani & Bill Kaye-Blake & Lulu Zeng, 2013. "Private Returns to Tertiary Education - How Does New Zealand Compare to the OECD?," Treasury Working Paper Series 13/10, New Zealand Treasury.
  11. Robert Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts For a Worker Who Envies His Boss," CESifo Working Paper Series 1282, CESifo Group Munich.
  12. Alexander Schiersch, 2013. "Firm size and efficiency in the German mechanical engineering industry," Small Business Economics, Springer, Springer, vol. 40(2), pages 335-350, February.
  13. Yang, Sheng-Ping & DeBeaumont, Ronald, 2010. "Pay as incentive or pay as reward? The case of Taiwan," Journal of Asian Economics, Elsevier, Elsevier, vol. 21(1), pages 76-86, February.

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