Affiliation:
1. Anders Frederiksen is a Professor of Business Economics at Aarhus University. Daniel Baltzer Schjødt Hansen is a manager at Siemens Gamesa and affiliate to Aarhus University. Colleen Flaherty Manchester is a Professor in the Carlson School of Management at the University of Minnesota
Abstract
Group-based incentives are attractive in contexts where production is interdependent. Prior work shows such incentives increase group performance despite freeriding concerns, yet little is known about the effort response of individuals. Using individual-level data, the authors assess the introduction of group-based performance pay using difference-in-difference estimation. Overall, performance increased by 19%. Nearly all workers contributed to this effect. Further, two-thirds of this effect stems from increased efficiency (more output per unit of time) and one-third from higher attendance. Both incentive and selection effects are present. By leveraging individual-level data, the authors pose new questions and evidence to the group-based incentives literature.
Funder
The Danish Research Council
Subject
Management of Technology and Innovation,Organizational Behavior and Human Resource Management,Strategy and Management