Team building and hidden costs of control
AbstractThis paper investigates the interaction of intrinsic and extrinsic incentives. We propose a simple principal-agent model with control that incorporates the existence of social groups resulting from common experiences in the past. Our laboratory experiment shows that agents with previous common experiences with their principals (CE agents) perform better than agents without such experiences (NCE agents). However, as soon as actual control exceeds their expectation, CE agents decrease their performance substantially, which has no equivalent for NCE agents. This pronounced decrease in effort when control is perceived as excessive represents a novel channel through which hidden costs of control materialize. Our results have important implications for firms' strategies to motivate employees. --
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Bibliographic InfoPaper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 66.
Date of creation: 2012
Date of revision:
Employee motivation; Principal-agent theory; Experiments;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-BEC-2012-10-13 (Business Economics)
- NEP-CBE-2012-10-13 (Cognitive & Behavioural Economics)
- NEP-CTA-2012-10-13 (Contract Theory & Applications)
- NEP-EXP-2012-10-13 (Experimental Economics)
- NEP-HRM-2012-10-13 (Human Capital & Human Resource Management)
- NEP-SOC-2012-10-13 (Social Norms & Social Capital)
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