This research contributes to the literature in several important ways. First, I provide exploratory evidence on the interplay between incentive pay and management control initiatives within firms. These results emphasize a need to jointly consider combination of incentive pay schemes along with imposition of control mechanisms to facilitate communication and monitoring between workers as we design compensation systems for teams. These findings are in line with recent observations in the contracting literature. For example, Bonner and Sprinkle (2002) and Ichniowski and Shaw (2003) calls for greater integration between incentive pay and elements in job design when designing compensation systems to enhance the incentive effects of monetary incentives. Likewise, these findings provide further evidence about the importance of creating complementarities between incentive pay and organizational design as a viable strategy to enhance organizational performance, coinciding with the findings of theoretical studies (Baker, Jensen, &
Murphy, 1988; Holmstrom & Milgrom, 1994; Milgrom & Roberts, 1995). The study may also help to guide firms in the design and implementation of better incentive plans for teams.
The remainder of the paper is organized as follows: the next section discusses the research setting and compares the original and new incentive plan. Hypotheses development reviews the literature and develops hypotheses. Data and methodology describes the sample and the empirical methodology. Results are discussed in Empirical results. The paper concludes with a discussion of the main findings and offer suggestions for future research.