Gambardella, Panico, and Valentini on “Strategic Incentives to Human Capital”

Motivating human capital in knowledge-intensive activities is a serious managerial challenge because it is difficult to link rewards to actions or performance. Firms instead might motivate knowledge workers by offering them opportunities to increase personal benefits (e.g., learning, satisfaction) through autonomy in the decision-making process. Our model shows that firms can offer less autonomy in projects closer to their core business: Because firm specialization raises the value of the project’s…

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