Incentive Life-cycles: Learning and the Division of Value in Firms - Archive ouverte HAL Access content directly
Journal Articles Administrative Science Quarterly Year : 2012

Incentive Life-cycles: Learning and the Division of Value in Firms

(1) , (2)
1
2

Abstract

In this paper, we study the individual and organizational learning mechanisms leading to the evolution of the division of value between economic actors under a given contractual arrangement. Focusing on the division of value between a firm and its employees, we theorize that following a change in the organizational incentive structure, employees learn, over time and with experience, how to be more productive under the implied objectives of the incentive regime, as well as how to game or exploit it. Results, based on outlet-level data from a Polish commercial bank over a 13-month period, show that the bank outlets' value creation (sales revenue from primary loans) and value appropriation (the sum of outlet employees' monthly bonus) both increased, at a decreasing rate, over time as outlet employees gained experience under the new incentive regime. In parallel, the bank's share (the percentage of value created by outlets retained by the bank) increased at first, then, after reaching a plateau, decreased continuously, indicating that the ability of the incentive regime to induce the intended results evolved, giving rise to an incentive lifecycle. In exploring the underlying micromechanisms, we found strong quantitative and qualitative evidence for the presence and relative paces of productive and adverse learning in bank outlets, as well as for the role of prior experience. This is the first empirical study to show that individual and organizational learning processes can influence the evolution of the division of value between economic actors.
Not file

Dates and versions

hal-00853783 , version 1 (23-08-2013)

Identifiers

Cite

Tomasz Obloj, Metin Sengul. Incentive Life-cycles: Learning and the Division of Value in Firms. Administrative Science Quarterly, 2012, 57 (2), pp.305-347. ⟨10.1177/000⟩. ⟨hal-00853783⟩

Collections

HEC CNRS
1947 View
0 Download

Altmetric

Share

Gmail Facebook Twitter LinkedIn More