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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
Jean-Louis Rulliere
Marie-Claire Villeval
Romain Zeiliger

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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 magagers appearing performance driven, while students are more cost driven.

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Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 0070.

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Length: 11 pages
Date of creation: 2004
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Handle: RePEc:feb:artefa:0070

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

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References listed on IDEAS
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  4. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
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  8. David J. Cooper et al., 1999. "Gaming against Managers in Incentive Systems: Experimental Results with Chinese Students and Chinese Managers," American Economic Review, American Economic Association, vol. 89(4), pages 781-804, September. [Downloadable!] (restricted)
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  11. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(1), pages 23-39, March. [Downloadable!] (restricted)
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  16. Dickinson, David L, 1999. "An Experimental Examination of Labor Supply and Work Intensities," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 638-70, October. [Downloadable!] (restricted)
  17. Carpenter, Jeffrey & Burks, Stephen & Verhoogen, Eric, 2004. "Comparing Students to Workers: The Effects of Social Framing on Behavior in Distribution Games," IZA Discussion Papers 1341, Institute for the Study of Labor (IZA). [Downloadable!]
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  19. van Dijk, Frans & Sonnemans, Joep & van Winden, Frans, 2001. "Incentive systems in a real effort experiment," European Economic Review, Elsevier, vol. 45(2), pages 187-214, February. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Waichmann, Israel & Requate, Tilman & 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. [Downloadable!]
  3. David Dickinson & Marie-Claire Villeval, 2004. "Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theorie," Post-Print halshs-00180112_v1, HAL. [Downloadable!]
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