cases, coping organizations. Analyses of incentive schemes in such organizational settings also exhibit a large variation in the research designs. (Beer and Cannon 2004) study the failure of 13 incentive plans at Hewlett Packard using interviews and internal documents, finding that managers abandoned the programs due to the perceived costs. Providing slightly more comprehensive evidence, in a worldwide survey of 205 top managers (Beer and Katz 2003) document the weak support of incentive schemes among management. Both studies echo some concerns identified in similar public sector studies, but suffer from weaknesses in their research design.

A number of quantitative observational studies improve upon prior work by using more representative samples. (Belfield and Marsden 2003) use panel data from a large UK work place survey, which include both piece-rate jobs and ―knowledge work‖ jobs in which performance is based on achievement of previously agreed goals, and find strong effects of individual pay-for-performance, but only conditionally on the monitoring regime. Another study uses the British Household Panel Survey to distinguish the productivity and sorting effects of performance pay, finding that jobs with performance-related pay attract workers of higher ability and induce workers to provide greater effort (Booth and Frank 1999).

(Blasi, Freeman, et al. 2008) econometrically examine the relationship between various forms of profit sharing and stock options on staff turnover, absenteeism, effort, and other productivity measures. The analysis is based on two large surveys of private sector firms, and finds statistically significant positive linkages between these shared capitalism schemes and perceptions of workplace performance such as turnover, loyalty, and worker effort. These incentives have the strongest impact when combined with other organizational variables such as competitive wages, training, and employee involvement in workplace policies.

(Hochberg and Lindsey 2010) is one of the few empirical examinations of the impact of stock options on company rank-and-file on firm performance (as opposed to the impact of options on top executives, on which there is a large literature). Since stock options are a group incentive based on overall company performance, incentives to free-ride are very high. However, alternative literature also suggests that nonexecutive compensation may also increase cooperation and encourage mutual monitoring among coworkers. Using a large database for a broad set of firms, and explicitly controlling for endogeneity, the study shows that stock options exert a positive effect on firm performance. The study also finds that this effect is higher on smaller firms, consistent with the free-riding hypothesis, and also higher in firms with higher growth opportunities where the monetary incentive is higher.

(Aboody, Johnson, et al. 2007) also examine the impact of executive and non-executive stock options on firms‘ operating performance, based on an empirical investigation of a sample of 1300 firms and contrasting between firms that re-priced their options to make them an attractive financial incentive versus those that did not. The study finds that while firms that repriced their options had a larger increase in operating income and cash flows compared to non-repricers, this impact was entirely due to executive stock options. The repricing of non-executive stock options had no impact, consistent with the free-rider argument, and in contrast to the (Hochberg and Lindsey 2010).

Some studies from the private sector have also highlighted other conditional variables, such as strength of social networks, that impact pay incentives. (Bandiera, Barankay, et al. 2005) use data from a farm labor operation to compare the effects of piece-rate versus relative incentive schemes, showing that individual piece-rates enhance effort irrespective of social relations among workers, whereas the effects of relative incentive schemes, which impose negative externalities among workers, is diminished when workers have stronger social ties. On the other hand, if incentives explicitly recognize team efforts, team rewards can outperform individual piece-rate wages, as one study on team work in a garment plant has shown 20