Knowledge-intensive sectors and the role of collective performance-related pay

The main contribution of this study is showing that the efficiency effects of collective performance-related pay (CPRP) are more pronounced in knowledge-intensive service sectors (KISs) than in other sectors. The hypothesis is that human resource practices such as CPRP are particularly useful for enhancing firm performance when innovation-supporting knowledge is distributed among multiple skill sets and employee creativity, knowledge creation and knowledge sharing are key success factors for the firm. Cross-sectional estimates obtained for a national sample of approximately 3,800 Italian firms confirm this prediction. These results are validated by adopting a treatment effect approach to solve the self-selection problem.