Abstract

Despite considerable practitioner interest in gainsharing compensation programs, understanding how gainsharing works and, thus, how to improve it in practice is hampered by a lack of a theoretical foundation upon which to build empirically testable models. The authors use a risk-sharing framework to develop a model of gainsharing that they hope will provide this missing theoretical foundation. In their model the authors develop propositions that highlight the differences between group-wide and individual incentive arrangements and that establish boundary conditions for a theory of gainsharing.

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