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Compensating for innovation: Do small firms offer high-powered incentives that lure talent and motivate effort?

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  • Todd R. Zenger

    (John M. Olin School of Business, Washington University, Campus Box 1133, St. Louis, MO 63130, USA)

  • Sergio G. Lazzarini

    (Ibmec São Paulo, R. Maestro Cardim 1170, São Paulo, SP 01323-001, Brazil)

Abstract

Empirical studies commonly confirm that small firms enjoy efficiency advantages in generating innovation. However, the origin of this advantage remains poorly understood. This study explores the hypothesis that small firms enjoy advantages over large firms in crafting effective, incentive-intensive employment contracts that lure top engineering talent and motivate high effort. These hypotheses are tested using data from a sample of R&D engineers in Silicon Valley and the Route 128 area. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Todd R. Zenger & Sergio G. Lazzarini, 2004. "Compensating for innovation: Do small firms offer high-powered incentives that lure talent and motivate effort?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 329-345.
  • Handle: RePEc:wly:mgtdec:v:25:y:2004:i:6-7:p:329-345
    DOI: 10.1002/mde.1194
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    References listed on IDEAS

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    Cited by:

    1. repec:bla:stratm:v:38:y:2017:i:7:p:1455-1477 is not listed on IDEAS
    2. Sanjog Misra & Harikesh Nair, 2011. "A structural model of sales-force compensation dynamics: Estimation and field implementation," Quantitative Marketing and Economics (QME), Springer, vol. 9(3), pages 211-257, September.
    3. Oliver Baumann & Nils Stieglitz, 2011. "Motivating Organizational Search," DRUID Working Papers 11-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    4. D. Paolini, 2012. "Institutional Complexity and Managerial Efficiency: A Simple Model," Working Paper CRENoS 201223, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. M. Shyam Kumar, 2013. "Production knowledge and its impact on the mechanisms of governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 261-281, May.
    6. Claire Bonnard, 2012. "The Access of the Young Graduates in Sciences into R&D Profession: A Switching Model Treatment for the French Case," LABOUR, CEIS, vol. 26(1), pages 46-65, March.
    7. Hart E. Posen & Dirk Martignoni & Daniel A. Levinthal, 2013. "E Pluribus Unum: Organizational Size and the Efficacy of Learning," DRUID Working Papers 13-09, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    8. Onishi, Koichiro, 2013. "The effects of compensation plans for employee inventions on R&D productivity: New evidence from Japanese panel data," Research Policy, Elsevier, vol. 42(2), pages 367-378.
    9. Henry Sauermann, 2017. "Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms," NBER Working Papers 23099, National Bureau of Economic Research, Inc.
    10. Lee, Neil & Sameen, Hiba & Cowling, Marc, 2015. "Access to finance for innovative SMEs since the financial crisis," Research Policy, Elsevier, vol. 44(2), pages 370-380.
    11. Barros, Henrique M. & Lazzarini, Sergio G., 2009. "Meritocracy and Innovation: Is There a Link? Empirical Evidence from Firms in Brazil," Insper Working Papers wpe_162, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    12. ONISHI Koichiro & OWAN Hideo, 2010. "Incentive Pay or Windfalls: Remuneration for employee inventions in Japan," Discussion papers 10049, Research Institute of Economy, Trade and Industry (RIETI).
    13. Claire Bonnard, 2011. "Les incitations à l'innovation dans le secteur privé," Post-Print halshs-00599700, HAL.
    14. d'Andria, Diego & Uebelmesser, Silke, 2016. "The relationship between R&D intensity and profit-sharing schemes: evidence from Germany and the United Kingdom," Annual Conference 2016 (Augsburg): Demographic Change 145622, Verein für Socialpolitik / German Economic Association.

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