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Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students

  • Claude Montmarquette

    (Université de Montréal - Département de Sciences Economique - Université de Montréal)

  • Jean-Louis Rullière


    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Marie Claire Villeval


    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines, IZA - Institute for the Study of Labor - Institute for the Study of Labor IZA)

  • Romain Zeiliger

    (GATE - Groupe d'analyse et de théorie économique - CNRS - UL2 - Université Lumière - Lyon 2 - Ecole Normale Supérieure Lettres et Sciences Humaines)

After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real effort experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven while students are more cost driven.

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Paper provided by HAL in its series Post-Print with number halshs-00175004.

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Date of creation: Mar 2004
Date of revision:
Publication status: Published in IZA Discussion Papers n° 1057 published in: Management Science, 2004, 50 (10), 1379-1389. 2004
Handle: RePEc:hal:journl:halshs-00175004
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