Country-Compatible Incentive Design

Abstract:     
Today’s management faces the challenge of employing workforces in different countries. Institutional frameworks, both formal and informal, in various countries influence employees’ preferences related to performance rewards and management styles. We conduct an empirical study to examine employees of a German multinational corporation at its locations in China, Germany, Japan, and the U.S. We find that employees from these countries have different preferences on incentives and management styles. Therefore, motivational mechanisms designed for one country might not work in others. We also find that the logic of diminishing marginal utility applies to most performance rewards.

Number of Pages in PDF File: 20

Keywords: Incentive Compensation, Institutional Frameworks, Management Style, Motivation, Performance Rewards

JEL Classification: M12, M16, M52

Accepted Paper Series