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on Human Capital and Human Resource Management |
| By: | Yaping Shan (School of Economics, University of Adelaide) |
| Abstract: | This study examines an agency problem between a firm and its research employees in a continuous-time dynamic setting. As a solution to the problem, the study presents an optimal contract and discusses its implementation. In the implementation, a primary component of the agent's compensation is a risky security, and the principal lets the agent choose the consumption and effort levels subject to a sequence of minimum holding requirements. This implementation theoretically justifies the widespread use of performance-vested equity-based compensation by firms that rely on R&D. |
| Keywords: | Dynamic Contract, Repeated Moral Hazard, R&D, Performance-vesting Provisions,Private Saving |
| JEL: | D23 D82 D86 J33 L22 O32 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2017-15&r=hrm |
| By: | Majerczyk, Michael; Sheremeta, Roman; Tian, Yu |
| Abstract: | We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding is likely to occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining effort over time, mitigating free-riding problem, increasing cooperation and decreasing collusion within teams. |
| Keywords: | individual incentive, team incentive, tournament, free-riding, collusion |
| JEL: | C72 D72 H41 |
| Date: | 2018–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86280&r=hrm |
| By: | Daniel Danau; Annalisa Vinella |
| Abstract: | Riordan and Sappington (JET, 1988) show that in an agency relationship in which the agent’s type is correlated with a public ex post signal, the principal may attain first best (full surplus extraction and efficient output levels) if the agent is faced with a lottery such that each type is rewarded for one signal realization and punished equally for all the others. Gary-Bobo and Spiegel (RAND, 2006) show that this kind of lottery is most likely to be locally incentive compatible when the agent is protected by limited liability. In this paper, we investigate how the principal should construct the lottery to attain not only local but also global incentive compatibility. We first assess that the main issue with global incentive compatibility rests with intermediate types being potentially attractive reports to both lower and higher types. We then show that a lottery including three levels of profit (rather than only two) is optimal in that it is most likely to be globally incentive compatible under limited liability, if local incentive constraints are strictly satisfied. We identify conditions under which first best is implemented. In a setting with three types and three signals we also pin down the optimal distortions when those conditions are violated. We show that, if local incentive compatibility is not an issue but first best is beyond reach, then it is generally optimal to concede an information rent to one type only. |
| Keywords: | informative signals, limited liability, conditional probability, incentive compatibility, full-rank condition |
| JEL: | D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6974&r=hrm |
| By: | Chi, Chang Koo (Dept. of Economics, Norwegian School of Economics); Olsen, Trond E. (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | This paper analyzes relational contracts under moral hazard. We first show that if the available information (signal) about effort satisfies a generalized monotone likelihood ratio property, then irrespective of whether the first-order approach (FOA) is valid or not, the optimal bonus scheme takes a simple form. The scheme rewards the agent a fixed bonus if his performance index exceeds a threshold, like the FOA contract of Levin (2003), but the threshold can be set differently. We next derive a sufficient and necessary condition for non-verifiable information to improve a relational contract. Our new informativeness criterion sheds light on the nature of an ideal performance measure in relational contracting. |
| Keywords: | Relational contracts; non-verifiable performance measures; first-order approach; bonus scheme; informativeness criterions |
| JEL: | D00 D20 D21 D80 D86 |
| Date: | 2018–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2018_006&r=hrm |
| By: | Krasikov, Ilia (Penn State University;); Lamba, Rohit (Penn State University); Mettral, Thomas (HU Berlin) |
| Abstract: | A large supplier (principal) contracts with a small firm (agent) to repeatedly provide working capital in return for payments. The total factor productivity of the agent is private and follows a Markov process. Moreover, the agent is less patient than the principal. We solve for the optimal contract in this environment. Distortions are pervasive and efficiency unattainable. The optimal contract is characterized by two key properties: restart and shutdown, which capture various aspects of contracts offered in the marketplace. The optimal distortions are completely pinned down by the number of low TFP shocks since the last high shock. Once a high shock arrives, the contract loses memory and repeats the same cycle, we call this endogenous resetting feature restart. If ex ante agency frictions are high, the principal commits to not serving the low type, we call this shutdown. The principal prefers a patient agent if the interim agency friction, as measured by the persistence of the private information is large, and she prefers an impatient agent if it is small. Finally, when global incentive constraints bind, we (i) provide the complete recursive solution, and (ii) characterize a simpler incentive compatible contract that is approximately optimal. |
| Keywords: | ; |
| Date: | 2018–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:94&r=hrm |
| By: | Margaretha Buurman (VU Amsterdam, Netherlands); Josse (J.) Delfgaauw (Erasmus University Rotterdam); Robert (A.J.) Dur (Erasmus University Rotterdam, CESifo, IZA); Robin Zoutenbier (Ministry of Finance, The Netherlands) |
| Abstract: | We conducted a field experiment to examine the effects of student feedback to teachers at a large Dutch school for intermediate vocational education. Students evaluated all teachers, but only a randomly selected group of teachers received feedback. Additionally, we asked all teachers before as well as after the experiment to assess their own performance on the same items. We find a precisely estimated zero average treatment effect of receiving feedback on student evaluation scores a year later. Only those teachers whose self-assessment before the experiment is much more positive than their students' evaluations improve significantly in response to receiving feedback. We also find that provision of feedback reduces the gap between teachers' self-assessment and students' assessment, but only to a limited extent. All of these results are driven by the female teachers in our sample; male teachers turn out to be unresponsive to student feedback. |
| Keywords: | field experiment; feedback; teachers; student evaluations; gender differences |
| JEL: | C93 I2 M5 |
| Date: | 2018–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20180042&r=hrm |
| By: | Viete, Steffen; Erdsiek, Daniel |
| Abstract: | We investigate whether the returns to mobile information and communication technology (ICT) in the workplace are contingent on granting employees autonomy over the structure of their workday through trust-based work time arrangements (TBW). Our regression analysis is based on a production function framework and exploits fine-grained firm survey data on ICT use and organisational practices for 1,045 service firms in Germany. We find empirical support for the argument that the returns to mobile ICT are higher when TBW allows for discretion over when, where and how to perform work-related tasks. The finding holds when we account for more limited forms of workplace flexibility, suggesting that the high degree of formal employee autonomy under TBW drives the complementarity between mobile ICT and organisational practices. |
| Keywords: | mobile information and communication technologies,ICT,trust-based work time,work organisation,complementarity,productivity,firm performance |
| JEL: | D22 L22 M10 O33 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:18013&r=hrm |
| By: | Lukas Windlinger |
| Abstract: | Current studies on the effects of work environments on employees can be criticised with regard to three aspects: (1) they are often based on single buildings or organisations and therefore not generalizable. (2) the influences of work design and the social environment are often not separated from the influences of the work environment. (3) the focus lies either on physical or perceived parameters – the two perspectives are usually not put into relation with each other.In order to contribute to a more comprehensive understanding of the effect of workplace factors on office users, data from 39 buildings have been collected. A total of 1373 users of these office buildings participated in a survey. Multi-level models show that building-level variables are not generally informative in relation to office user-level outcomes such as satisfaction, well-being or job performance. Rather, employees’ perceptions of their office environments explain variance in self-reported outcomes. Perceptions of the office environment explain additional variance in relation to work design. The multi-level models further indicate that different aspects of the office environment contribute to variance explained in different outcomes. Important predictors for job satisfaction are workspace quality, distractions, and control over the environments. Health status is influenced by social density and distractions. Finally, job performance and work engagement are affected by workspace quality, distractions, and workplace appropriateness.The results therefore imply that leveraging office design and management workplace / facilities managers can promote satisfaction, health, job performance, and work engagement. Thus, the results from the two studies have several implications for business managers, workspace designers, and workplace / facilities managers. |
| Keywords: | multi-level modeling; Satisfaction; Well-Being; work engagement; workplace management |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_269&r=hrm |
| By: | Domenico Lisi (Department of Economics and Business, University of Catania); Luigi Siciliani (Department of Economics and Related Studies, University of York); Odd Rune Straume (Department of Economics/NIPE, University of Minho) |
| Abstract: | Health outcomes, such as mortality and readmission rates, are commonly used as indicators of hospital quality and as a basis to design pay-for-performance (P4P) incentive schemes. We propose a model of hospital behaviour under P4P where patients di§er in severity and can choose hospital based on quality. We assume that risk-adjustment is not fully accounted for and that unobserved dimensions of severity remain. We show that the introduction of P4P which rewards lower mortality and/or readmission rates can weaken or strengthen hospitalsíincentive to provide quality. Since patients with higher severity have a di§erent probability of exercising patient choice when quality varies, this introduces a selection bias (patient composition e§ect) which in turn alters quality incentives. We also show that this composition e§ect increases with the degree of competition. Critically, readmission rates su§er from one additional source of selection bias through mortality rates since quality a§ects the distribution of survived patients. This implies that the scope for counterproductive e§ects of P4P is larger when Önancial rewards are linked to readmission rates rather than mortality rates. We also show that our results are robust in the presence of public reporting, and discuss welfare implications. |
| Keywords: | quality; pay-for-performance; health outcomes; performance indicators; heterogeneous severity; selection bias. |
| JEL: | I12 I18 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:06/2018&r=hrm |
| By: | Liesa Schrand; Claudia Ascherl; Wolfgang Schaefers |
| Abstract: | Motivated by the ongoing debates on the underrepresentation of women in top management and increased number of quota-based policy initiatives, this study investigates the relationship between gender diversity in boardrooms and firm performance. The real estate industry, a traditionally male dominated industry, may benefit from group heterogeneity, since a variety of perspectives, knowledge and experiences enhances decision making (Carter et al., 2003). In the context of mandated diversity policies, the North American market remains unregulated. Therefore, this study examines, whether there is a certain critical mass of female board members in the US real estate sector which positively affects firm performance.With a dataset of 116 listed property companies from the USA in the period of 2005-2015, we find evidence for a positive significant relationship between the percentage of women on boards and Tobin’s Q. In detail, balanced boards (40-60%female representation) outperform boards with fewer women. Consequently, adding just one woman to the board has no effect on the performance, a situation which is referred to as tokenism. Additionally, the findings show that the proportion of executive female directors is statistically related to a positive performance. Beyond that, female CEOs improve the market based performance by approximately 20%. The model specifications control for unobserved heterogeneity by using fixed effects regression and mitigate endogeneity concerns by using lagged board variables.This is the first real-estate-based gender diversity study for the US market considering differences between executive and non-executive board members. |
| Keywords: | accounting based perfomance; board structure; critical mass; gender diversity; Tobins%27 Q |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_48&r=hrm |