1. Introduction
In the family and business interface (Litz, 2008), an important issue faced by many
small- and medium-size privately held family firms (hereafter SME family firms) is
the limited ability to compete in the market for managerial labor and provide
competitive compensation (Block, 2011; Carney, 2005; Ensley et al., 2007). Indeed,
incentive compensation decisions are critical in all organizations since they influence
how individuals behave (Baker et al., 1988). Gibbons and Murphy (1992) show that to
maximize managerial effort, compensation contracts should be designed to optimize
total incentives (i.e. the combination of the implicit incentives from career opportunities
and explicit incentives from the compensation contract).
1. IntroductionIn the family and business interface (Litz, 2008), an important issue faced by manysmall- and medium-size privately held family firms (hereafter SME family firms) isthe limited ability to compete in the market for managerial labor and providecompetitive compensation (Block, 2011; Carney, 2005; Ensley et al., 2007). Indeed,incentive compensation decisions are critical in all organizations since they influencehow individuals behave (Baker et al., 1988). Gibbons and Murphy (1992) show that tomaximize managerial effort, compensation contracts should be designed to optimizetotal incentives (i.e. the combination of the implicit incentives from career opportunitiesand explicit incentives from the compensation contract).
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