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

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Author Info

  • Montmarquette, Claude

    ()
    (University of Montreal)

  • Rullière, Jean-Louis

    ()
    (University of Lyon 2)

  • Villeval, Marie Claire

    ()
    (CNRS, GATE)

  • Zeiliger, Romain

    ()
    (University of Lyon 2)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1057.

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Length: 53 pages
Date of creation: Mar 2004
Date of revision:
Publication status: published in: Management Science, 2004, 50 (10), 1379-1389
Handle: RePEc:iza:izadps:dp1057

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

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References

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Citations

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Cited by:
  1. Gächter, Simon & von Krogh, Georg & Haefliger, Stefan, 2010. "Initiating private-collective innovation: The fragility of knowledge sharing," Research Policy, Elsevier, Elsevier, vol. 39(7), pages 893-906, September.
  2. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, Elsevier, vol. 63(1), pages 56-76, May.
  3. Brice Corgnet, 2009. "Peer Evaluations and Team Performance: When Friends Do Worse Than Strangers," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 12/09, School of Economics and Business Administration, University of Navarra.
  4. 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, Chapman University, Economic Science Institute 11-05, Chapman University, Economic Science Institute.
  5. 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, Elsevier, vol. 40(4), pages 347-355, August.
  6. 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.
  7. 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, Elsevier, vol. 17(5), pages 751-765, October.
  8. Brice Corgnet & Roberto Hernán-González & Eric Schniter, 2013. "Why Real Leisure Really Matters: Incentive Effects on Real Effort in the Laboratory," Working Papers, Chapman University, Economic Science Institute 13-22, Chapman University, Economic Science Institute.
  9. Simon Gaechter & Georg von Krogh & Stefan Haefliger, 2006. "Private-Collective Innovation and the Fragility of Knowledge Sharing," Discussion Papers, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham 2006-21, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  10. Nathalie Colombier & Laurent Denant-Boèmont & Youenn Lohéac & David Masclet, 2008. "Une étude expérimentale du degré individuel et collectif d’aversion au risque," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 185(4), pages 89-101.

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