Profit sharing and innovation

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummaryWe investigate the effect of profit sharing on product and process innovation. The general aim of companies introducing profit sharing in their remuneration policy is to stimulate staff performance. As profit maximization becomes a win-win strategy to both the employees and the firm owners, their mutual interests become aligned. If the incentive system works in an efficient way and if employees behave rationally, they will increase their efforts, which should subsequently raise the company's performance.While many studies consider the effects of profit sharing on firm performance in general (productivity, profitability), not much is known about the effects on innovation. In this paper, we introduce measures of technological progress in an attempt to unravel how profit sharing may interact with firm performance through the realisation of both product and process innovations. We employ the IAB establishment panel, an extensive dataset on German establishments over the time periods 2005 to 2009. In order to eliminate possible selectivity effects, we apply static matching and conditional difference-in-differences methods.Based on the matching results, profit sharing companies outperform non-profit sharing companies on both process and product innovativeness. However, according to the results of the conditional difference-in-differences method only product innovation is enhanced by the introduction of profit sharing. Hence firms introducing profit sharing are already more innovative with respect to both product and process innovations before they launch the variable incentive method of profit sharing. But profit sharing additionally has a positive effect on product innovations. Das Wichtigste in Kürze AbstractWe 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 wit...

Crowding‐out or crowding‐in? Direct voice, performance‐related pay, and organizational innovation in European firms

“…Indeed, MCT predicts that the effects of extrinsic rewards vary according to their nature, with “controlling” rewards crowding‐out intrinsic motivation and “supportive” rewards crowding‐in intrinsic motivation (Frey & Jegen, ). Consistently with recent compensation studies suggesting that the characteristics of PRP plans are relevant for understanding their impact on employee innovative behavior (e.g., Aerts, Kraft, & Lang, ; De Spiegelaere, Van Gyes, & Van Hootegem, ; Sanders et al, ), we argue that individual PRP plans (such as piece‐rate and commission), being strictly task‐contingent and focused on the quantity of individual output produced, may be perceived as controlling by employees and have a crowding‐out effect on the intrinsic motivation associated with direct EV. On the contrary, collective PRP plans, such as profit‐sharing schemes, that are focused on organizational outcomes, are more likely to be perceived as supportive and will incentivize employees to contribute to their firm's performance by sharing their ideas for organizational innovation, thus having a crowding‐in effect on the intrinsic motivation associated with direct EV.…”

Intellectual Property and Innovation Process under Goal 17 of Sustainable Development

“…The transfer of technology has different forms: acquisition of patents or licenses (Jiang & Iii, 2010); mergers, acquisition or joint-ventures operations; acquisition of machines, equipment and components; reverse engineering; analysis of information contained in the catalogues of products, publications or presented at congresses, and hiring technicians from competing companies (Almario, 2018). The oncoming evolution of the intensive interaction between innovation transformation-such as technology transfer in the application of the ownership right transfer between the employer and employees (Aerts, Kraft, & Lang, 2015), that is, the innovation creators (Adhikari, Choi, & Sah, 2017)-and their practitioners requires monitoring of legislation that directs the productivity and potential economic consumption (Irani, 2010). Internationalization (Archibugi & Michie, 1995) of the whole system starts showing an upward trend in obtaining the right to apply economic value on a global scale (Molero & Garcia, 2008).…”

“…Moreover, some employees interact with customers and can detect their preferences as strategic information for the firm (Aerts, Kraft, & Lang, 2015). Benefits of profit share could be combined with the curve of learning approach, which is provided in the long process of adaptation to work post.…”

New Improvement of Labor Accounting in the Sharing Economy

“…From the above research status of the sharing economy both in China and abroad, the discussion on its new features, new content, and improvement prospects is extensive, with some scholars having verified the practical effect of sharing economy at different levels [13,14]; most of their research is based on the sharing economy program, which includes the Employee Stock Ownership Plan (ESOP), Stock Option Plan (SOP), and Limited Partnership (LP). However, with the improvement of the sharing economy, sharing accounting data need to be collected in a more timely and extensive manner and the impact evaluation of the sharing economy also needs to be supported by systematic statistical accounting methods.…”