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Profit-Sharing and Productivity: An Analysis of UK Engineering Firms

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  • Cable, John
  • Wilson, Nicholas

Abstract

This paper reports productivity differentials of 3-8 percent in favor of profit-sharing firms in the U.K. engineering industry. The estimates come from equations in which profit sharing interacts with factor input levels and the firms' technological, organizational, and labor-force characteristics, and imply more than a simple incentive effect on work effort, or more "cooperative" behavior in given circumstances. A technological/labor-relations interpretation of the origin of the gains is suggested, which are found to be asymmetrically distributed. The results question policy measures to encourage profit sharing that do not take account of its significance in the process of organizational design. Copyright 1989 by Royal Economic Society.

Suggested Citation

  • Cable, John & Wilson, Nicholas, 1989. "Profit-Sharing and Productivity: An Analysis of UK Engineering Firms," Economic Journal, Royal Economic Society, vol. 99(396), pages 366-375, June.
  • Handle: RePEc:ecj:econjl:v:99:y:1989:i:396:p:366-75
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    Cited by:

    1. repec:iab:iabmit:v:33:i:4:p:565-582 is not listed on IDEAS
    2. Joanne Loundes, 2000. "Management and Industrial Relations Practices and Outcomes in Australian Workplaces," Melbourne Institute Working Paper Series wp2000n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Nicholas Wilson & John R. Cable & Michael J. Peel, 1990. "Quit Rates and the Impact of Participation, Profit-Sharing and Unionization: Empirical Evidence from UK Engineering Firms," British Journal of Industrial Relations, London School of Economics, vol. 28(2), pages 197-213, July.
    4. repec:iab:iabmit:v:28:i:2:p:214-223 is not listed on IDEAS
    5. Davide Antonioli & Paolo Pini & Roberto Antonietti, 2014. "Flexible pay systems and labour productivity: Evidence from Emilia-Romagna manufacturing firms," Working Papers 2014143, University of Ferrara, Department of Economics.
    6. Martin Conyon & Richard B. Freeman, 2004. "Shared Modes of Compensation and Firm Performance U.K. Evidence," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 109-146 National Bureau of Economic Research, Inc.
    7. Cardoso, Renato Fragelli, 1995. "Profit sharing with heterogeneous entrepreneurial prowess," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 265, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    8. Wolf, Elke & Zwick, Thomas, 2002. "Produktivitätswirkung von Mitarbeiterbeteiligung : der Einfluss von unbeobachteter Heterogenität (The effect of employee participation in asset formation on productivity : the influence of unobserved ," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 35(1), pages 123-132.
    9. Hübler, Olaf, 1995. "Produktivitätssteigerung durch Mitarbeiterbeteiligung in Partnerschaftsunternehmen? (Increase in productivity through employee participation in partnership companies)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 28(2), pages 214-223.
    10. Yao, Shujie, 1997. "Profit Sharing, Bonus Payment, and Productivity: A Case Study of Chinese State-Owned Enterprises," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 281-296, June.
    11. Bruce Rayton, 1997. "Rent-sharing or incentives? Estimating the residual claim of average employees," Applied Economics Letters, Taylor & Francis Journals, vol. 4(12), pages 725-728.
    12. Möller, Iris, 2000. "Produktivitätswirkung von Mitarbeiterbeteiligungen (Productivity effect of employee participation in asset formation)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 33(4), pages 565-582.
    13. Xin Meng & Frances Perkins, 1996. "Behavioural Differences among Chinese Firms From the Perspective of Earnings Determination," Departmental Working Papers 1996-09, The Australian National University, Arndt-Corden Department of Economics.
    14. Robert Drago & Mark Wooden, 1991. "The Determinants of Participatory Management," British Journal of Industrial Relations, London School of Economics, vol. 29(2), pages 177-204, June.
    15. John Pencavel, 2013. "Worker cooperatives and democratic governance," Chapters,in: Handbook of Economic Organization, chapter 24 Edward Elgar Publishing.
    16. repec:sbe:breart:v:15:y:1995:i:2:a:2886 is not listed on IDEAS
    17. Tim R.L. Fry & Kelly Jarvis & Joanne Loundes, 2002. "Are Pro-Reformers Better Performers?," Melbourne Institute Working Paper Series wp2002n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    18. Bryson, Alex & Freeman, Richard B., 2007. "Doing the right thing? does fair share capitalism improve workplace performance," LSE Research Online Documents on Economics 4964, London School of Economics and Political Science, LSE Library.
    19. Sandeep Bhargava & Tim Jenkinson, 1996. "Partage explicite ou implicite du profit dans la détermination des salaires," Économie et Prévision, Programme National Persée, vol. 126(5), pages 19-29.
    20. FitzRoy, Felix R. & Kraft, Kornelius, 1995. "On the choice of incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 145-160, January.
    21. repec:iab:iabmit:v:35:i:1:p:123-132 is not listed on IDEAS
    22. Engellandt, Axel & Riphahn, Regina T., 2004. "Incentive Effects of Bonus Payments: Evidence from an International Company," IZA Discussion Papers 1229, Institute for the Study of Labor (IZA).
    23. Douglas L. Kruse, 1993. "Does Profit Sharing Affect Productivity?," NBER Working Papers 4542, National Bureau of Economic Research, Inc.
    24. Cahuc, Pierre & Dormont, Brigitte, 1997. "Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data," Labour Economics, Elsevier, vol. 4(3), pages 293-319, September.

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