Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students

Claude Montmarquette (), Rullière, Jean-Louis, Marie-Claire Villeval () and Romain Zeiliger
Additional contact information
Rullière, Jean-Louis: GATE, CNRS and University of Lumiere Lyon 2
Romain Zeiliger: GATE, CNRS, and University of Lumiere Lyon 2

No 1057, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real effort experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven while students are more cost driven.

Keywords: executive and team-based compensation; subject pool effects; real effort experiment; incentives; sorting; mergers (search for similar items in EconPapers)
JEL-codes: C81 C92 J33 M52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-com, nep-dev and nep-exp
Date: 2004-03
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Related works:
Working Paper: Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students (2004)
Working Paper: Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students (2003)
Working Paper: Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students (2004)
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