Performance measures and incentives: evidence from field experiments in firms

Field experiments in firms are a valuable tool for gaining insights into the causal effects of management controls in complex, real-world environments. Not only do they enable researchers to examine the effect of management controls individually, but they also provide a means of understanding the multifaceted interaction between controls that can be challenging to estimate accurately otherwise. This chapter reviews the literature on field experiments in firms investigating the effect of incentives and different performance measures. The studies reviewed highlight the variety of performance measures and suggest that no “one size fits all” solution exists. Furthermore, several studies emphasize the importance of carefully selecting performance measures, as it may be the chosen measure that hinders the effectiveness of the incentive rather than the incentive design itself. Further research is needed in this area, including testing the implementation of previously investigated incentives and performance measures in various environments.