Competitiveness and performance related pay in family firms: the case of Italy

Despite the rich literature on top executives’ compensations in family and non-family firms, differences in the compensation structure of employees in these enterprises have received much less attention. Furthermore, not enough attention has been paid to the specific role of the compensation structure of employees on labour productivity and competitiveness of family business. We analyze the compensation structure of Italian firms focusing on performance related pays (PRP) offered to employees to verify if these contingent rewards play a differential role on wages, labour productivity and competitiveness (i.e. the ratio of productivity and wages) in family-influenced firms with respect to their non family counterparts. The empirical evidence is provided by a national sample of firms of the non-agricultural private sector of the Italian economy. A fixed effects quantile regression is used to explore heterogeneous effects of PRP along productivity and wages distributions. Our results show that PRP has a greater enhancing role on labour productivity in family businesses, coupled with a more moderate influence on wages with respect to their non family counterparts. Thus PRP may be a governance device that helps to gain competitiveness and may contribute at endurance of family firms.