Abstract
Family and nonfamily firms both must align owner and employee interests. However, family firms may experience lower labor productivity because of adverse selection problems from labor market sorting and attenuation. Incentive compensation reduces alignment of interest problems in family and nonfamily firms. Importantly, incentive compensation signals to potential employees that performance will be rewarded, which should improve the relative labor productivity in family firms by reducing adverse selection. Analysis of matched data on 216,768 firms supports our hypotheses, implying that incentive compensation has a broader impact on firm performance than commonly recognized in the family firm or human resource literatures.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
