Why are Small Firms Different? Managers’ Views

Jonas Agell

Scandinavian Journal of Economics, 2004, vol. 106, issue 3, 437-452

Abstract: Do incentives differ between large and small organizations? Results from a representative survey of compensation managers are used to shed light on the issues. I find that (i) small establishments rely less on pecuniary incentives, and have a significantly more hostile attitude towards incentive schemes based on competition and relative rewards; (ii) large units are more vulnerable to mechanisms of efficiency wages, effects that remain even after controlling for differences in monitoring ability; (iii) large units are more prone to indicate that negative reciprocity is important, and that their employees care about relative pay. I argue that these findings fit with behavioral stories of incentives and motivation, in particular those stressing group interaction effects, inequity aversion and gift exchange.

Date: 2004
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https://doi.org/10.1111/j.0347-0520.2004.00371.x

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