Information and profit sharing between a buyer and a supplier: Theory and practice

This paper is about aspects of an optimal relationship between 2 firms, a supplier and a retailer, in a 2‐party supply chain. The focus is on sharing private information when demand uncertainty exists so as to better coordinate the supply chain. It draws inspiration from a real case in Ireland of a new fish‐processing company, Oceanpath, and a supermarket chain, Superquinn, in which information was shared. The argument is that sharing the retailer's information increases supply chain profit, as well as benefiting consumers. Profit sharing will be needed to guarantee that both the retailer and the supplier gain when information is shared.     

Profit sharing with a contest among agents

We consider how an internal competition in the form of a contest among agents can be combined with profit sharing in team production. The principal can choose to share between the principal and the agents as well as the sharing rule with a competitive contest among the agents. We show that under some conditions, a pure strategy equilibrium of profit sharing exists. In equilibrium, internal sharing involves a contest that is more competitive than proportional sharing, and the principal can get higher profit compared to proportional sharing.     

Pay knowledge,pay satisfaction and employee commitment: evidence from Finnish profit‐sharing schemes

Knowledge of the pay system has been identified as one of the key elements affecting the success of the reward system. In this paper, the aim is to study how communication, performance feedback and membership length are related to profit‐sharing knowledge, and how profit‐sharing knowledge is related to profit‐sharing satisfaction and organisational commitment. The data is collected from Finnish personnel funds, which are deferred profit‐sharing schemes. Survey data from over 753 employees in 30 companies in different sectors were used. In studying the antecedents of profit‐sharing knowledge, we found strong evidence that better profit‐sharing communication and higher membership length increase profit‐sharing knowledge. Furthermore, we find strong evidence that the relationship from profit‐sharing knowledge to commitment is mediated by profit‐sharing satisfaction. We discuss the implications for management.     

A pricing‐error rule on share distribution in equity joint ventures: The Bayesian approach

Equity joint ventures (EJVs) are a popular governance mode of inter‐firm cooperation that has attracted substantial research attention. The literature, however, still lacks a precise rule for the parents to follow in splitting the equity shares of an EJV, although share distribution is critical to almost all aspects of the co‐ownership relationship. In this study, we fill this literature gap by taking the Bayesian approach to draw a pricing‐error rule on share distribution in EJVs. More specifically, we contend that equity participation by two firms in an EJV allows profit sharing to correct for the errors that they might commit in pricing their inputs to the EJV. For profit sharing to fully nullify such pricing errors, the shares of an EJV must be split between the parent firms in a percentage combination that matches the relative sizes of their pricing errors. Because pricing errors are observable only afterward, share distribution in EJVs resembles a Bayesian process, in which the partners keep updating their estimates on pricing errors to adjust share distribution to a percentage combination that could best nullify their pricing errors. Thus, the eventual outcome of share adjustment is EJV buyout, in that the partner whose pricing errors remain substantial buys out the shares of the other whose pricing errors have become tolerable.     

Impacts of revenue sharing,profit sharing and transfer pricing on quality-improving investments

We compare revenue sharing with different profit-sharing rules and constant transfer prices in a buyer-seller setting, in which the incompleteness of contracts causes decentralization costs. Our focus is on a situation where a manufacturing department or a supplier of an intermediate product can invest in a quality improvement of the final product and thereby increase customer demand. We analyze the willingness of the supplier to invest under a revenue-sharing rule, three profit-sharing rules and a transfer-pricing scheme. Our analysis shows that the performance of sharing rules is likely to decrease when the sharing basis consists of fewer cost components. Remarkably, this is not true for the revenue-sharing rule. To the contrary, this less prominent scheme can be shown to maximize total profit under a variety of cost combinations.     

Profit‐sharing plans and affective commitment: Does the context matter?

This article analyzes the relationship between profit‐sharing plans (PSP) and affective commitment and how it is affected by the context of the PSP application. Overall, there is a positive relationship between profit sharing and commitment that is strongest in very small firms. The efficacy of a PSP in improving employees' affective commitment appears to be greatest in firms with low job‐related employee participation. Its application in workplaces where employees enjoy high levels of participation appears to have little impact and may even result in slight declines in affective commitment. © 2009 Wiley Periodicals, Inc.     

Efficiency in complementary partnerships with competition

The objective of this paper is to show how efficiency can be implemented in a market with strictly complementary inputs when the productive firms undertake unobservable effort. The observable output is a joint undertaking by a partnership consisting of two types of firms. It is shown that simple linear sharing rules cannot implement socially optimal effort, but a modified linear sharing rule can implement the first‐best outcome provided that commitment to the proposed sharing rule is possible. This is so even when the sharing rule is proposed by one of the active partners. When opening up for the possibility of renegotiating sharing contracts that have undesirable properties for one or more of the firms, it becomes more difficult to implement socially efficient solutions. Implementation of the socially efficient outcome requires that the sharing rule is proposed by an outsider to the partnership. Copyright © 2008 John Wiley & Sons, Ltd.     

Exploring psychological determinants of sharing donor recognition on social networking sites.

Not‐for‐profit organizations (NFPs) are increasingly turning to online platforms to engage with donors. However, sharing rates of donation activity to social networking sites (SNSs) are low. Existing research has predominantly taken an aggregated approach to understanding SNS sharing behavior, therefore this study took a context‐specific approach and explored; why do donors choose to share (or not share) donor recognition on social networking sites? A qualitative research design was employed using interviews with 20 Australian donors. Social, organizational and individual factors were identified as influential to donors' decisions to share online donor recognition. This study extends understanding around online self‐disclosure and firm‐generated electronic word‐of‐mouth and provides strategic direction for NFPs to encourage greater donation sharing behavior on SNSs.     

Profit Sharing and Training*

We analyze the impact of profit sharing on training intensity. Profit sharing may affect training because it is a credible commitment by firms to reward firm‐specific skills, may reduce turnover and leads to peer group pressure to participate in training courses. To eliminate possible selectivity effects, we combine matching with difference‐in‐differences. We identify the proportion of employees participating in profits and differentiate profit sharing according to the percentage of the workers covered. Using German establishment data we find that profit sharing only has a significant effect on training intensity if the majority of the workforce benefits from it.     

The Impact of Profit Sharing on the Performance of Financial Services Firms*

abstract Relying on macro theories (agency and organizational control) as well as micro theories (goal setting and expectancy), this study investigates the impact of profit‐sharing plan (PSP) adoption on the value creation process of financial services firms. The study relies on a comprehensive methodological approach that is both quantitative, with a dual cross‐sectional/longitudinal (pre‐post) design that compares PSP adopters with a control group of PSP non‐adopter firms, and qualitative through interviews with some adopting firms’ managing directors. Results show that firms adopting a PSP enhance their profitability in comparison to both their own prior performance and to firms that are not adopting a PSP. Results also show that the adoption of a PSP: (a) positively influences only profit drivers that are under employee control; and (b) is more likely to have a long term, positive impact on external profit drivers than on internal profit drivers. Qualitative data from field interviews corroborate and enrich these quantitative findings.     

The linkage between profit sharing and organizational citizenship behaviour

The study investigated the effects of profit sharing (cash-based, stock-based and combined-total profit sharing) on organizational citizenship behaviour (OCB). It also examined the mediating role of organizational commitment on the relationship between profit sharing and OCB. Data were collected from 426 employees of 35 information electronics companies in Taiwan. Results showed that whereas cash-based profit sharing had no effect on OCB, both combined-total profit sharing and stock-based profit sharing positively influenced OCB. We also found that organizational commitment mediated the relationship between profit sharing (stock-based and combined-total profit sharing) and OCB.     

Financial participation and performance in Europe

This article assesses whether financial participation (profit‐sharing and employee share ownership plans) is associated with positive performance outcomes, and whether direct and indirect employee participation complement financial participation in this respect. It also examines whether employee involvement in the design of financial participation afects performance outcomes. The article uses data from a survey of listed firms in Finland, Germany, the Netherlands and the UK. Several outcome measures are used, based on respondents' assessments of the effects of financial participation. Higher participation in equity‐based plans, but not in profit‐sharing, is found to be associated with more successfil outcomes. None of fhe other forms of employe? pnrticipafion uins found to contribute to the success of financial participation. The results therefore cast some doubt on complementarity between financial and other forms of participation.     

Discriminatory input pricing and strategic delegation

This paper examines how discriminatory input pricing by an upstream monopolist affects the incentives that owners of downstream duopolists offer their managers. Regardless of the mode of competition (quantity or price), owners of downstream firms induce their managers to be more profit‐oriented and to behave less aggressively when the monopolist is allowed to price‐discriminate than when he charges a uniform price. If the monopolist price‐discriminates, managerial downstream firms always earn more than owner‐managed profit‐maximizing firms. However, if the monopolist charges a uniform price, managerial downstream firms earn more than profit‐maximizing counterparts under price competition and earn less under quantity competition. Copyright © 2009 John Wiley & Sons, Ltd.     

Profit sharing and the quality of relations with the boss

Profit sharing generates conflicting changes in the relationship between supervisors and workers. It may increase cooperation and helping effort. At the same time it can increase direct monitoring and pressure by the supervisor, and mutual monitoring and peer pressure from other workers that is transmitted through the supervisor. Using UK data on satisfaction with the boss, we show in both cross-section and panel estimates that workers under profit sharing tend to have lower satisfaction with their supervisor. This result persists even as profit sharing has no or a positive influence on other dimensions of job satisfaction. Additional estimates show that lower satisfaction with the supervisor is largely generated by women, who may be less able to respond to peer pressure, and by non-union workers, who may have more to lose by failing to respond to peer pressure.     

Mechanisms for dividing labor and sharing revenue in joint ventures

Organizing the productive efforts of firms participating in a joint venture involves assigning firms to tasks according to abilities. A multidimensional incentive problem arises when abilities are private information. In any equilibrium, it is better to be a firm who is a specialist rather than a generalist. However, generalists can expect to receive a larger allocation of revenue. If at least one firm is decisive to the profitability of the joint venture (i.e., if it can make a credible cost announcement that implies the joint venture earns zero profit), then the joint venture will not be able to implement a profit maximizing or cost minimizing production plan.Received: 21 March 2002, Accepted: 26 February 2004, JEL Classification: D82, C78, L23Any views expressed in this paper are not purported to reflect those of the United States Department of Justice. This paper benefited from the helpful comments of a referee and an associated editor.     

Consumers' processing of mindful commercial car sharing

Commercial car sharing offers a form of market‐mediated, access‐based consumption with a markedly lower impact on the natural environment than that of car ownership. Consumers adopting such alternative transportation modes are manifesting a marketplace behavior that can be said to be mindful because of the innovative and sustainable nature of car sharing. This study employs behavioral reasoning theory to examine how consumers' value orientations, as well as reasons for and against car sharing, might be used in consumers' processing of mindful commercial car‐sharing adoption. Findings suggest that subjective norms (thoughts of important others for consumers, such as co‐workers) serve an important mediating role for both consumers' value orientations and reasons for car sharing in their relationship with car‐sharing behavior. These results provide marketing researchers important knowledge about green consumption and suggest that practitioners would do well to emphasize the social dimension when marketing environmentally oriented services, such as car sharing.     

Ownership,firm size and rent sharing in Bulgaria

Using a unique three-digit firm-level data set of all medium and large manufacturing enterprises in Bulgaria covering the years 1997–1998, we investigate how wages are affected by ownership status, firm size and rent sharing. Our pooled OLS, panel and first-difference TSLS estimates clearly point to ownership structure as an important determinant of both the wage level (for given productivity) and the degree of rent sharing. Rent sharing is very pronounced in state-owned firms but far less pronounced in private domestic and foreign firms. The results strongly confirm the existence of a multinational wage premium. In addition, we find weak evidence of a positive firm size-wage effect and a positive effect of firm size on the degree of rent sharing. If these effects exist, they are often more pronounced in private domestic firms.     

High-involvement information sharing practices: an international perspective

The type of information shared within organizations is a key aspect of strategic human resources management. In this exploratory study, we expand our understanding of high-performance work systems (HPWSs) by examining the information sharing practices of firms operating in different countries to assess the extent that high-involvement-oriented information sharing in organizations is influenced by home-country economic structures and national cultural factors. We assess firm-level data from a 12-country sample to evaluate the use of formal information sharing practices for non-managerial employees. The results of our analysis support the contention that information sharing practices varies by country, and that cultural similarities based on geographical region exist within the three information content areas of business strategy, financial performance, and organization of work. Specifically, we found significant variance in information sharing practices of firms based in different countries but homogeneity of practices among geographical neighbors. There is a modest positive relationship between sharing business strategy information and perceived firm performance that is significantly stronger in North America compared to other regions. These results have important implications for the ongoing theoretical development of mechanisms underlying the use of HPWS practices in an international context.     

A reconsideration of the link between vertical externality and managerial incentives

Previous research revealed that the strategic role of delegation contracts disappears if two quantity‐setting firms outsource input production to a monopolistic supplier. I show that this role is restored if the assumption of a downstream duopoly is relaxed. Thus, delegation contracts allow downstream profit‐maximizing owners to commit their firms to a behavior that differs from their preferences. This behavior varies nonmonotonically with the number of firms in the downstream market. Corresponding deviations from profit maximization are larger if the upstream monopolist makes a price precommitment. But little to no deviation occurs if the number of firms is large.     

Supply chain practice and information sharing

Effective supply chain practice and information sharing enhances the current supply chain management environment. The purpose of this study is to investigate the integration of information sharing and supply chain practice in supply chain management. Data from 125 North American manufacturing firms were collected. The results show that (1) effective information sharing significantly enhances effective supply chain practice; (2) supply chain dynamism has significant positive influence on effective information sharing as well as effective supply chain practice. Supply chain dynamism has more influence on information sharing than supply chain practice; (3) and effective supply chain practice becomes more important when the level of information sharing increases. The findings show that both effective information sharing and effective supply chain practice are critical in achieving good supply chain performance.