This paper investigates the strategic value of the managerial incentive scheme in affecting firms' incentive in R&D investment and their product market activities. Firstly, we find that in Cournot-quantity competition, owners strategically assign a non-profit-maximization objective to their...

Incentives theory suggests that compensation schemes should be analyzed along two dimensions: controllability and congruence. Most schemes cannot satisfy both criteria at once. EVA bonus schemes, a major managerial innovation of the 90's, favor the congruence criterion. This paper questions ist...

We experimentally investigate a simple version of Holmström?s career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents? unknown ability and the effort they choose. Before making second-period wage offers firms are informed...

Variable pay, defined as pay that is tied to some measure of a firm?s output, has become more important for executives of the typical American firm. Variable pay is usually touted as a way to provide incentives to managers whose interests may not be perfectly aligned with those of owners. The...

In this paper I present a theory of the boundary of the firm that accounts for some important characteristics of real-world multidivisional firms: Operative decisions are in the hands of middle managers who are rewarded with incentive contracts based on the performance of their units; Managers'...

The promotion tournament as a potentially important incentive mechanism for top management in transition economies has not been examined by the emerging literature on managerial incentives in transition economies. This paper is the first attempt to fill this important gap in the literature. The...

This questionnaire survey of fund managers in the United States, Germany and Switzerland documents a distinctly positive influence of bonus payments on investment behavior on both sides of the Atlantic. Higher bonus payments are significantly related to higher working effort but not to risk...

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...