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Redesigning teams and incentives in a merger: An experiment with managers and students

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  • Claude Montmarquette
  • Jean-Louis Rulliere
  • Marie-Claire Villeval
  • Romain Zeiliger

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 effort 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.

Suggested Citation

  • Claude Montmarquette & Jean-Louis Rulliere & Marie-Claire Villeval & Romain Zeiliger, 2004. "Redesigning teams and incentives in a merger: An experiment with managers and students," Artefactual Field Experiments 00099, The Field Experiments Website.
    • Handle: RePEc:feb:artefa:00099
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    More about this item

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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