Journal article
Are Employee Selection and Incentive Contracts Complements or Substitutes?
MA Abernethy, HC Dekker, AKD Schulz
Journal of Accounting Research | Published : 2015
Abstract
There is a debate in the literature as to whether employee selection is a substitute or complement to incentive contracting. We argue that incentive contracts and selection can be both complements and substitutes conditional on the contracting difficulty faced by the firm. We examine these control choices in a setting where contracting difficulties arise due to the firm's choice of strategy and from the volatility created by the firm's external environment. We select a firm's commitment to organizational learning (OL) as our strategic choice variable as this provides a useful proxy for identifying settings where explicit incentive contracting is difficult. The results show that, as firms bec..
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Funding Acknowledgements
Accepted by Douglas Skinner. Constructive comments were received from Shannon Anderson, Tony Davila, Jan Greve, Martijn Schoute, Laurence van Lent, Eelke Wiersma, and seminar and conference participants at Bocconi University, Erasmus University Rotterdam, Kobe University, London School of Economics, University of Technology Sydney, VU University, the AAA Management Accounting Section meeting, and the EIASM Conference on New Directions in Management Accounting. We would also like to thank Simon Bell and Genevieve Thompson for their contribution to the design of the survey and the financial support from the University of Melbourne that has allowed this collaboration. We would particularly like to thank the editor and the reviewer for their insightful comments and constructive advice throughout the review process.