The Firm as an Incentive System

We explore the twin hypotheses (i) that high-performance incentives, worker ownership of assets, and worker freedom from direct controls are complementary instruments for motivating workers, and (ii) that such instruments can be expected to covary positively in cross-sectional data. We also relate o...

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Bibliographic Details
Published in:The American economic review 1994-09, Vol.84 (4), p.972-991
Main Authors: Holmstrom, Bengt, Milgrom, Paul
Format: Article
Language:English
Subjects:
Agency theory
Applications
Causal covariation
Contracts
Economic theory
Employee ownership
Employees
Employment
Enterprises
Franchise agreements
Hypotheses
Incentives
Independent contractors
Marginal costs
Mathematical independent variables
Modeling
Participatory management
Productivity
Random variables
Sales commissions
Sales personnel
Salespeople
Workers
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Summary:We explore the twin hypotheses (i) that high-performance incentives, worker ownership of assets, and worker freedom from direct controls are complementary instruments for motivating workers, and (ii) that such instruments can be expected to covary positively in cross-sectional data. We also relate our conclusions to empirical evidence, particularly that on the organization, compensation, and management of sales forces.
ISSN:0002-8282
1944-7981