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Profit sharing and firm size: The role of team production

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  • Heywood, John S.
  • Jirjahn, Uwe

Abstract

This paper presents a model showing that profit sharing is subject to the 1/N problem in the case of independent worker productivity but not in the case of interdependent worker productivity. This implies the role of firm size on the likelihood of profit sharing will differ by the nature of the underlying technology. We test this implication using German establishment data and using a proxy for interdependent worker productivity. The results conform to the theory showing that firm size is associated with reduced profit sharing use when technology is independent but not when technology is interdependent.

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  • Heywood, John S. & Jirjahn, Uwe, 2009. "Profit sharing and firm size: The role of team production," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 246-258, August.
    • Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:246-258
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    5. Vladimir Pecheu, 2021. "Profit Sharing as a Bargaining Weapon Against Unions," Working Papers halshs-03247551, HAL.
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    7. Jirjahn, Uwe & Mohrenweiser, Jens, 2023. "Variable Payment Schemes and Productivity: Do Individual-Based Schemes Really Have a Stronger Influence than Collective Ones?," IZA Discussion Papers 16267, Institute of Labor Economics (IZA).
    8. Dong, Lu & Falvey, Rod & Luckraz, Shravan, 2019. "Fair share and social efficiency: A mechanism in which peers decide on the payoff division," Games and Economic Behavior, Elsevier, vol. 115(C), pages 209-224.
    9. Göddeke, Anna & Haucap, Justus & Herr, Annika & Wey, Christian, 2011. "Stabilität und Wandel von Arbeitsmarktinstitutionen aus wettbewerbsökonomischer Sicht," DICE Ordnungspolitische Perspektiven 10, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    10. Tony Fang, 2016. "Profit sharing: Consequences for workers," IZA World of Labor, Institute of Labor Economics (IZA), pages 225-225, January.
    11. Uwe Jirjahn & Kornelius Kraft, 2010. "Teamwork And Intra‐Firm Wage Dispersion Among Blue‐Collar Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 404-429, September.
    12. Chong Wang & Mingli Zheng, 2023. "Profit sharing with a contest among agents," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 244-250, January.
    13. Palsule-Desai, Omkar D. & Tirupati, Devanath & Chandra, Pankaj, 2013. "Stability issues in supply chain networks: Implications for coordination mechanisms," International Journal of Production Economics, Elsevier, vol. 142(1), pages 179-193.
    14. Chao, Hong & Croson, Rachel T.A., 2013. "An experimental comparison of incentive contracts in partnerships," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 78-87.
    15. Petr Petera & Jana Fibírová, 2015. "Basic Approaches to Profit-Sharing and Ideas for Utilization [Základní přístupy k "profit-sharingu" a náměty na další využití]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2015(3), pages 97-117.
    16. Marco A. Barrenechea-Mendez & Sara Martinez-de-Morentin, 2021. "Profit Sharing, Interconnected Autonomous Teams, and Employee Productivity," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2107, Departamento de Economía - Universidad Pública de Navarra.
    17. Kornelius Kraft & Julia Lang, 2016. "Just a Question of Selection? The Causal Effect of Profit Sharing on a Firm's Performance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 444-467, July.
    18. Thomas Cornelissen & John S. Heywood & Uwe Jirjahn, 2010. "Profit Sharing and Reciprocity: Theory and Survey Evidence," Research Papers in Economics 2010-04, University of Trier, Department of Economics.
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    25. Belloc, Filippo, 2022. "Profit sharing and innovation across organizational layers," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 598-623.

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