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Performance Pay and Prior Learning—Evidence from a Retail Chain

Author

Listed:
  • Kathrin Manthei

    (Rheinische Fachhochschule Cologne, D-41460 Neuss, Germany)

  • Dirk Sliwka

    (Faculty of Management and Social Sciences at the University of Cologne, D-50923 Köln, Germany)

  • Timo Vogelsang

    (Frankfurt School of Finance & Management, D-60322 Frankfurt am Main, Germany)

Abstract

We report the results of two field experiments in a retail chain and show that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay first for district managers and later for store managers, we find negligible average treatment effects. From surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis—for instance, finding positive treatment effects (only) in stores with low job experience.

Suggested Citation

  • Kathrin Manthei & Dirk Sliwka & Timo Vogelsang, 2021. "Performance Pay and Prior Learning—Evidence from a Retail Chain," Management Science, INFORMS, vol. 67(11), pages 6998-7022, November.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:11:p:6998-7022
    DOI: 10.1287/mnsc.2020.3825
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    References listed on IDEAS

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    Cited by:

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    2. Clemens, Marco & Sauermann, Jan, 2024. "Making the Right Call: The Heterogeneous Effects of Individual Performance Pay on Productivity," IZA Discussion Papers 17119, Institute of Labor Economics (IZA).
    3. Max Thon & Oliver Gürtler & Matthias Heinz & Kai Schäfer & Dirk Sliwka, 2024. "Strategic incentives in intermediary markets: Field-experimental evidence," ECONtribute Discussion Papers Series 297, University of Bonn and University of Cologne, Germany.

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