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The impact of group incentives on performance of small firms: Hausman-Taylor estimates

Author

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  • Kshitija Dixit

    (Med Health Care and Decor Pvt. Ltd., Pune, India)

  • Rupayan Pal

    (Indira Gandhi Institute of Development Research (IGIDR), Mumbai, India)

Abstract

This paper investigates the impact of group incentives on firms' performance. It shows that group incentive raises firms' performance. This result empirically validates the implication of the theoretical literature that performance-related pay can potentially improve firms' performance, in the context of a developing country, and indicates the importance of group incentives in small firms. It also shows that partnership firms perform better than private limited companies and labour unions have a negative impact on firms' performance. It employs the Hausman-Taylor random effects estimator in order to isolate the effects of time-invariant covariates and also to tackle potential endogeneity problem. Copyright © 2010 John Wiley & Sons, Ltd.

Suggested Citation

  • Kshitija Dixit & Rupayan Pal, 2010. "The impact of group incentives on performance of small firms: Hausman-Taylor estimates," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 403-414.
    • Handle: RePEc:wly:mgtdec:v:31:y:2010:i:6:p:403-414
    DOI: 10.1002/mde.1494
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    References listed on IDEAS

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