Knowledge Sharing and Incentive Design in Production Environments: Theory and Evidence

41 Pages Posted: 8 Nov 2006 Last revised: 15 Apr 2011

See all articles by Yuhchang Hwang

Yuhchang Hwang

Arizona State University (ASU) - School of Accountancy; China Europe International Business School

David H. Erkens

Georgetown University - Robert Emmett McDonough School of Business

John Evans

University of Pittsburgh - Katz Graduate School of Business

Date Written: September 2008

Abstract

We develop and empirically test a parsimonious model of how specific knowledge and the value of knowledge sharing influence manufacturing plants’ incentive design choices. Our results confirm the prediction that increases in the extent of agents’ specific knowledge and the value of knowledge sharing are associated with greater (less) reliance on output (input) performance measures. Moreover, consistent with our model’s prediction, we find that plants rely more on group-based (as opposed to individual-based) output performance measures when the value of knowledge sharing is higher, or the extent of agents’ specific knowledge is lower. Finally, consistent with previous research, we find that as output performance measures become noisier, firms rely less on these measures in incentive contracts.

Keywords: knowledge, knowledge sharing, incentive design, group incentives

JEL Classification: D8, M5, J3

Suggested Citation

Hwang, Yuhchang and Erkens, David Hendrik and Evans, John Harry, Knowledge Sharing and Incentive Design in Production Environments: Theory and Evidence (September 2008). Accounting Review, Vol. 84, No. 4, 2009, Available at SSRN: https://ssrn.com/abstract=921141

Yuhchang Hwang (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

China Europe International Business School ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

David Hendrik Erkens

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

John Harry Evans

University of Pittsburgh - Katz Graduate School of Business ( email )

230 Mervis Hall
Pittsburgh, PA 15260
United States

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