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

See all articles by Elke Wolf

Elke Wolf

Center for European Economic Research (ZEW)

Thomas Zwick

University of Würzburg - Business Administration & Economics; Centre for European Economic Research (ZEW); Maastricht University - Research Centre for Education and the Labour Market (ROA)

Date Written: April 1, 2008

Abstract

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

Suggested Citation

Wolf, Elke and Zwick, Thomas, Reassessing the Productivity Impact of Employee Involvement and Financial Incentives (April 1, 2008). Schmalenbach Business Review, Vol. 60, April 2008. Available at SSRN: https://ssrn.com/abstract=1280863

Elke Wolf (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Thomas Zwick

University of Würzburg - Business Administration & Economics ( email )

Sanderring 2
Wuerzburg, D-97070
Germany

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

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