Kavli Affiliate: Johannes Lehmann
| First 5 Authors: Johannes Lehmann, Michael Beckmann, , ,
| Summary:
Using novel survey data from Swiss firms, this paper empirically examines the
relationship between the use of digital technologies and the prevalence of
performance incentives. We argue that digital technologies tend to reduce the
cost of organizational monitoring through improved measurement of employee
behavior and performance, as well as through employee substitution in
conjunction with a reduced agency problem. While we expect the former mechanism
to increase the prevalence of performance incentives, the latter is likely to
decrease it. Our doubly robust ATE estimates show that companies using business
software and certain key technologies of Industry 4.0 increasingly resort to
performance incentives, suggesting that the improved measurement effect
dominates the employee substitution effect. In addition, we find that companies
emerging as technology-friendly use performance incentives more frequently than
their technology-averse counterparts. Both findings hold for managerial and
non-managerial employees. Our estimation results are robust to a variety of
sensitivity checks and suggest that Swiss businesses leverage digital
technologies to enhance control over production or service processes, allowing
them to intensify their management of employees through performance incentives.
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