Why are Small Firms Different? Managers' Views
26 Pages Posted: 13 Nov 2003
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Why are Small Firms Different? Managers' Views
Why are Small Firms Different? Managers' Views
Date Written: November 2003
Abstract
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. field-survey, matched data
Keywords: firm-size effect, motivation, relative pay,
JEL Classification: J30, J41
Suggested Citation: Suggested Citation
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