Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272930 
Year of Publication: 
2023
Series/Report no.: 
GLO Discussion Paper No. 1298
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
While studies on individual-based and collective payment schemes are largely unconnected, there appears to be a widely held belief that individual-based schemes have a stronger influence on firm performance than collective ones. This also applies to an index of best management practices developed by Bloom and Van Reenen (2007). The index assigns the highest weight to individual-based performance pay, a medium weight to group-based performance pay and a low weight to profit sharing. This weighting is obviously driven by the implicit assumption that collective payment schemes suffer from a free-rider problem so they have a less strong influence on productivity than individual-based schemes. We show that this assumption is questionable from both a theoretical and an empirical point of view. Using the German Management and Organizational Practices Survey, one of the datasets initiated by Bloom and Van Reenen, we show that individual-based performance pay does not outperform group-based performance pay or profit sharing. The finding also holds when accounting for possible interactions among the payment schemes and considering the moderating roles of firm size, employee representation, and innovativeness. Our results suggest that researchers should be careful with respect to the assumptions and subjective priors guiding their empirical analyses.
Subjects: 
management practices
free-rider problem
individual performance pay
group performance pay
profit sharing
JEL: 
J33
M52
M50
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.