Why are Small Firms Different? Managers' Views

Abstract

Previous research indicates that, on average, large employers tend to provide their employees with higher wages as compared to their smaller counterparts.To better understand the reasoning behind this trend, the size effects in pay policy were examined.Questionnaires were distributed in March 1999, with 885 Swedish establishments included in the final sample.Background information on the businesses and the employees was provided by the business register of Statistics Sweden; by survey questions relating to union density, pay systems, and employment contracts; and by the tax and education registers of Statistic Sweden. Econometric analysis was used to analyze the data sets. Findings indicate the following:the use of performance pay and the importance of the career ladder were more prevalent in larger firms; larger firms tended to have more skewed earning distributions; peer pressure and work norms were more important in disciplinary actions in smaller firms; and large firm employees were more attentive to wage relativities than small firm employees.Details of thefindings are provided as well as the implications associated with them. (AKP)

Keywords: Experimental/primary research, Incentive pay, Motivation, Firm size, Wages & salaries, Incentive plans, Performance evaluation