The career concerns literature predicts that incentives for effort decline as beliefs about ability become more precise (Holmström, 1982/1999). In contrast, we show that effort can increase with belief precision if promotions to better-paid jobs make the returns to reputation non-linear. In...

We analyze the effects of lower bounds on wages on optimal job design within firms. In our model, two tasks affect firm value and an imperfect performance measure. Due to cost advantages of specialization, assigning the tasks to different agents is efficient. Yet a sufficiently large wage floor...

I compare group to individual performance pay when workers are envious and performance is non-verifiable. Avoiding payoff inequity, the group bonus contract is superior as long as the firm faces no credibility problem. The individual bonus contract may, however, become superior albeit...

We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's...

This paper examines the use of key employee retention and incentive plans (KERPs) in bankrupt firms. We find that firms in Chapter 11 are more likely to offer KERPs when firms are located in thicker employment markets, when creditors have strong control, and when bankrupt firms have complex...

Organizations often empower employees at all levels to propose innovation ideas that rely on their first-hand knowledge of their standard task (i.e. employee-initiated innovation). Many, however, struggle with motivating employees to develop innovative ideas that may benefit the firm, especially...

In management, incentives are a reward to motivate people and create favorable conditions directed to achieve specific goals and support organizational development. This conceptual paper analyses differences between intrinsic and extrinsic incentives to suggest management implications directed...

We propose an intuitive and simple-to-implement empirical classification of management models, based on whether agency issues are tackled by hierarchical monitoring or incentive contracts. The analysis of granular data from a large sample of Italian private firms reveals that the adoption of...

Traditionally, researchers have had difficulty testing the relationship between the degree of risk or uncertainty in workers' environments and incentive pay. The authors employ Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to...

We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's...