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The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data

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  • Kato, Takao

    (Colgate University)

  • Lee, Ju Ho

    (KDI School of Public Policy and Management)

  • Ryu, Jang-Soo

    (Pukyong National University)

Abstract

We report the first results for Korean firms on the incidence, diffusion, scope and effects of diverse employee financial participation schemes, such as Profit Sharing Plans (PSPs), Employee Stock Ownership Plans (ESOPs), Stock Option Plans (SOPs) and Team Incentive Plans (TIPs). In do doing, we assemble important new panel data by merging data from a survey of all Korean firms listed on Korean Stock Exchange which enjoys an unusually high response rate of 60 percent with accounting data from their corporate proxy statements. Our estimated fixed effect models of production functions reveal consistently that the introduction of a PSP or a TIP will lead to a significant increase in productivity (about 10 percent) whereas no such evidence found for ESOPs or SOPs. We also find that the productivity payoff appears to be more long-lasting for PSPs than for TIPs. Finally, our fixed-effect estimates suggest that PSPs and TIPs tend to be substitutes rather than complements in their productivity effects.

Suggested Citation

  • Kato, Takao & Lee, Ju Ho & Ryu, Jang-Soo, 2010. "The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data," IZA Discussion Papers 5111, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5111
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    Cited by:

    1. Prince, Nicholas R. & Bruce Prince, J. & Kabst, Rüediger, 2020. "National culture and incentives: Are incentive practices always good?," Journal of World Business, Elsevier, vol. 55(3).
    2. Emmanuel Petrakis & Panagiotis Skartados, 2018. "Strategic Profit–Sharing in a Unionized Differentiated Goods Duopoly," Working Papers 1801, University of Crete, Department of Economics.
    3. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2013. "Wages and Labour Productivity: the role of performance-related pay in Italian firms," Quaderni del Dipartimento di Economia, Finanza e Statistica 124/2013, Università di Perugia, Dipartimento Economia.
    4. Doucouliagos, Chris & Laroche, Patrice & Kruse, Douglas L. & Stanley, T. D., 2018. "Where Does Profit Sharing Work Best? A Meta-Analysis on the Role of Unions, Culture, and Values," IZA Discussion Papers 11617, Institute of Labor Economics (IZA).
    5. Kato, Takao & Kauhanen, Antti, 2013. "Performance Pay and Enterprise Productivity: The Details Matter," ETLA Working Papers 21, The Research Institute of the Finnish Economy.
    6. Gilberto Tadeu Lima & Jaylson Jair Silveira, 2021. "Evolutionary microdynamics of employee profit sharing as productivity-enhancing device," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 417-449, April.
    7. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2016. "Performance related pay, productivity and wages in Italy: a quantile regression approach," International Journal of Manpower, Emerald Group Publishing Limited, vol. 37(2), pages 344-371, May.
    8. Gilberto Tadeu Lima & Jaylson Jair da Silveira, 2018. "Macrodynamic Implications of Employee Profit Sharing as Effort Elicitation Device," Working Papers, Department of Economics 2018_02, University of São Paulo (FEA-USP).

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    More about this item

    Keywords

    Korea; profit sharing; productivity; stock option; team incentive; employee stock ownership;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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