Abstract
We investigate organizational determinants and performance effects of formal target agreements for employees based on the IAB establishment panel, a representative panel of German establishments. The results show that establishments with a high employee turnover rate, a large proportion of temporary workers, and a highly qualified workforce are significantly more likely to implement target agreements. Also, establishments with works councils installed are more likely to do so, controlling, among others, for firm size. Concerning organizational performance, we apply a first-difference and a fixed effects approach and find that establishments that implement target agreements achieve around 5 % higher total sales compared to firms that did not introduce this practice. Hence, organizations seem to benefit from the implementation of formal target agreements for employees.
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Notes
Note that we control for these factors, in case they are time-invariant, by applying panel data methods.
For a detailed description of the data set, see Fischer et al. (2009) and Ellguth et al. (2014). Data access was provided via on-site use at the Research Data Centre (FDZ) of the German Federal Employment Agency (BA) at the Institute for Employment Research (IAB) and subsequently remote data access.
Using independent variables in absolute terms instead leads to the same results.
This number reflects the total annual headcount on June, 30 each year.
Note that multiple answers were possible.
For robustness reasons, we re-estimated the regressions by instead using continuous variables for the turnover rate, the proportion of temporary contracts and the qualification variables. The corresponding regressions confirm our results and are reported in Table 4 in the appendix.
Using qualitative information on establishment managers’ expectations about the development of sales in the current fiscal year as the dependent variable confirms our results. Here, the introduction of TAs leads to an increase in sales expectations of about \(3.9\,\%\) points. Based on the sample mean, this equals an increase of about \(10.7\,\%\), which is also economically significant.
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Acknowledgments
We thank the editor, two anonymous reviewers, Andrew Kinder, Dirk Sliwka, Stefanie Wolter as well as seminar and conference participants in Cologne, Glasgow, and Trier for helpful comments and suggestions. We further thank the Research Data Centre (FDZ) of the Federal Employment Agency at the Institute for Employment Research for data support.
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Kampkötter, P., Marggraf, K. & Zimmermann, JH. Determinants and effects of formal target agreements: an empirical investigation of German firms. Rev Manag Sci 11, 1–18 (2017). https://doi.org/10.1007/s11846-015-0177-5
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DOI: https://doi.org/10.1007/s11846-015-0177-5