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Accounting Review


group incentives; risk sharing; teams; partnerships; compensation.


Mina Pizzini




This study investigates factors influencing the use of group-based compensation
in professional service partnerships and the relation between group-based
compensation and performance. I use data on 11,971 physicians in 935 medical groups
to expand the extant literature on group incentives by providing some of the first largesample,
empirical evidence on the role of task interdependence, income risk, mutual
monitoring, and group size in a firm’s choice of compensation contract. Consistent
with agency theory, I find that group incentives are more prevalent in medical partnerships
that practice highly task-interdependent specialties and those that face greater
malpractice risk. Group-based incentives are also more common in relatively small
groups in which homogeneity in training, experience, and gender facilitate mutual monitoring.
Tests relating individual physician productivity to compensation method suggest
that productive benefits induced by group incentives offset reductions in output associated
with free-riding and effort devoted to monitoring.


Vol 85, Nomor 01, Tahun 2010


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