Reassessing the Productivity Impact of Employee Involvement and Financial Incentives
Schmalenbach Business Review, Vol. 60, April 2008
23 Pages Posted: 8 Oct 2008 Last revised: 30 Nov 2008
Date Written: April 1, 2008
Employee involvement and financial incentives are often praised as effective means for increasing firm productivity. We assess the productivity effects of these human resource practices by accounting for the main sources of estimation bias - unobserved heterogeneity and endogeneity - and by using representative establishment panel data for Germany. We show that employee involvement raises establishment productivity, but financial incentive systems do not. An important result is that accounting for unobserved heterogeneity and endogeneity reverses the conclusions on the estimated productivity effects obtained from simple cross-sectional regressions.
Keywords: High Performance Workplaces, Microeconometric Evaluation, Productivity
JEL Classification: C23, D23, D24, M12
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