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Agency and Compensation: Evidence from the Hotel Industry

Author

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  • Matthew Freedman
  • Renáta Kosová

Abstract

We examine how agency problems in the workplace interact with compensation policies by taking advantage of the structure of the hotel industry, in which many chains have both company-managed and franchised properties. As residual claimants on their properties’ profits, franchisees have stronger incentives to monitor employees than managers in company-managed hotels. Exploiting this variation and using rich, longitudinal data on the hotel industry, we estimate differences in wages and human resource practices across company-managed and franchised hotels within chains as well as within individual hotels as they change organizational form. Our results suggest that the timing of pay and the propensity to use performance-based incentives relate to the extent of agency problems within establishments. (JEL J31, J41, L23, L83)

Suggested Citation

  • Matthew Freedman & Renáta Kosová, 2014. "Agency and Compensation: Evidence from the Hotel Industry," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(1), pages 72-103.
    • Handle: RePEc:oup:jleorg:v:30:y:2014:i:1:p:72-103.
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    File URL: http://hdl.handle.net/10.1093/jleo/ews027
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    Citations

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    Cited by:

    1. Fong, Yuk-fai & Li, Jin, 2017. "Relational contracts, limited liability, and employment dynamics," Journal of Economic Theory, Elsevier, vol. 169(C), pages 270-293.
    2. Renáta Kosová & Giorgo Sertsios, 2018. "An Empirical Analysis of Self-Enforcement Mechanisms: Evidence from Hotel Franchising," Management Science, INFORMS, vol. 64(1), pages 43-63, January.
    3. Vázquez-Suárez, Luis & Mejía-Vásquez, Pericles Ramón & Serafim da Silva, Sheila & Sánchez-Gómez, Roberto, 2022. "Gender’s moderating role in the relationship between organisational form and performance in the Spanish supermarket industry," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    4. Yoon, Chungeun, 2023. "Technology adoption and jobs: The effects of self-service kiosks in restaurants on labor outcomes," Technology in Society, Elsevier, vol. 74(C).
    5. Tashlin Lakhani, 2022. "How and Why Does Franchise Ownership Affect Human Resource Practices? Evidence from the US Hotel Industry," ILR Review, Cornell University, ILR School, vol. 75(2), pages 321-347, March.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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