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Why are Small Firms Different? Managers' Views

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Do incentives in small organizations differ from those in large ones? This paper uses a representative survey of compensation managers to shed light on the issues. I find that (i) small establishments rely less on pecuniary incentives, and have a significantly more hostile attitude towards incentive schemes based on competition and relative rewards; (ii) large units are more vulnerable to mechanisms of efficiency wages, effects that remain even as I control for differences in monitoring ability; (iii) large units are more prone to indicate that negative reciprocity is important, and that their employees care about relative pay. I argue that these findings fit with behavioral stories of incentives and motivation, in particular those stressing group interaction effects, inequity aversion and gift exchange.

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File URL: http://www2.ne.su.se/paper/wp03_09.pdf
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2003:9.

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Length: 22 pages
Date of creation: 25 Aug 2003
Handle: RePEc:hhs:sunrpe:2003_0009
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Department of Economics, Stockholm, S-106 91 Stockholm, Sweden

Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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