Profit-sharing and innovation

Aerts, Kris ; Kraft, Kornelius ; Lang, Julia

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URN: urn:nbn:de:bsz:180-madoc-353686
Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ZEW Discussion Papers
Volume: 13-114
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L23 , L25 , O31 , O32,
Keywords (English): Profit sharing , innovation , matching , difference-in-differences
Abstract: We 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 with a share system show both more product and process innovations. In a dynamic setting, we find that the introduction of profit-sharing only spurs product innovation.

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