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

  • 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)

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.

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File URL: http://hdl.handle.net/10.1002/mde.1194
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 25 (2004)
Issue (Month): 6-7 ()
Pages: 329-345

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Handle: RePEc:wly:mgtdec:v:25:y:2004:i:6-7:p:329-345
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Rasmusen, Eric & Zenger, Todd, 1990. "Diseconomies of Scale in Employment Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 65-92, Spring.
  2. Levinthal, Daniel, 1988. "A survey of agency models of organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 9(2), pages 153-185, March.
  3. Erik Brynjolfsson & Thomas W. Malone & Vijay Gurbaxani & Ajit Kambil, 1994. "Does Information Technology Lead to Smaller Firms?," Management Science, INFORMS, vol. 40(12), pages 1628-1644, December.
  4. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
  5. Idson, Todd L & Feaster, Daniel J, 1990. "A Selectivity Model of Employer-Size Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 99-122, January.
  6. Bishop, John, 1987. "The Recognition and Reward of Employee Performance," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S36-56, October.
  7. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  8. Main, Brian G M & Reilly, Barry, 1993. "The Employer Size-Wage Gap: Evidence for Britain," Economica, London School of Economics and Political Science, vol. 60(238), pages 125-42, May.
  9. Coughlan, Anne T & Narasimhan, Chakravarthi, 1992. "An Empirical Analysis of Sales-Force Compensation Plans," The Journal of Business, University of Chicago Press, vol. 65(1), pages 93-121, January.
  10. Kathleen M. Eisenhardt, 1985. "Control: Organizational and Economic Approaches," Management Science, INFORMS, vol. 31(2), pages 134-149, February.
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