Profit-sharing and innovation

Kris Aerts, Kornelius Kraft and Julia Lang

No 13-114, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the effect of profit-sharing on product and process innovation. Profit-sharing is a credible commitment of the companies to let the employees participate in any efficiency gain. Resistance against technical progress becomes less plausible. Moreover, employees are stimulated to share their specific information advantage on possibilities to optimize the production process and products with the management. We take account of possible selectivity effects and using survey data on German companies with and without profitsharing in a conditional difference-in-differences framework, we test our hypothesis by comparing measures of innovativeness. Based on matching (selectivity on observable covariates) in a static comparison firms with a share system show both more product and process innovations. In a dynamic setting, we find that the introduction of profit-sharing only spurs product innovation.

Keywords: Profit Sharing; Innovation; Matching; Difference-in-Differences (search for similar items in EconPapers)
JEL-codes: L23 L25 O31 O32 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ino and nep-knm
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Journal Article: Profit sharing and innovation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:13114

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