Performance Pay, Delegation and Multitasking under Uncertainty and Innovativeness: An Empirical Investigation

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    It has been recently noted that the trade-off between risk and incentives that agency theory predicts turns out to be rather weak. We examine predictions from agency theory on the basis of data from a data set encompassing close to 1000 Danish firms. We find that the relation between performance pay and environmental uncertainty is indeed weak. We examine the relation between delegation and environmental uncertainty, and find that this relation is confirmed. We also examine the multi-tasking agency hypothesis that as risk increases, the flexibility of agents is restricted. We fail to find support for this hypothesis.
    It has been recently noted that the trade-off between risk and incentives that agency theory predicts turns out to be rather weak. We examine predictions from agency theory on the basis of data from a data set encompassing close to 1000 Danish firms. We find that the relation between performance pay and environmental uncertainty is indeed weak. We examine the relation between delegation and environmental uncertainty, and find that this relation is confirmed. We also examine the multi-tasking agency hypothesis that as risk increases, the flexibility of agents is restricted. We fail to find support for this hypothesis.
    LanguageEnglish
    JournalJournal of Economic Behavior & Organization
    Volume58
    Issue number2
    Pages246-276
    ISSN0167-2681
    DOIs
    StatePublished - 2005

    Keywords

    • Uncertainty
    • Pay-for-performance
    • Delegation
    • Innovation
    • Competition

    Cite this

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    Performance Pay, Delegation and Multitasking under Uncertainty and Innovativeness : An Empirical Investigation. / Foss, Nicolai J.; Laursen, Keld.

    In: Journal of Economic Behavior & Organization, Vol. 58, No. 2, 2005, p. 246-276.

    Research output: Contribution to journalJournal articleResearchpeer-review

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