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Author: | Zábojnik, J. |
Title: | Sales maximization and specific human capital. |
Journal: | RAND Journal of Economics
1998 : WIN, VOL. 29:4, p. 790-802 |
Index terms: | Incentives Human resource management Rate of profit Sales promotion |
Language: | eng |
Abstract: | The author offers an alternative explanation why a profit-maximizing principal may find it optimal to give her agent incentives to maximize something other than profits. The argument is that tying the executive's pays to sales can induce more efficient investment in firm-specific human capital due to the difficulty of writing contracts that specify the level of firm-specific human capital to be accumulated by the worker. The author investigates optimal managerial contracts from this point of view and shows that the optimal contact is a function of sales in addition to profits. |
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