Summary
While equity-based employee incentives can positively affect labour productivity in family firms, our understanding of the effect of nonequity-based employee incentives remains limited. Integrating expectancy theory with the socioemotional wealth preservation literature, our study investigates the impact of cash profit sharing (CPS) on family firms’ labour productivity. Specifically, CPS is viewed as a motivational device for enhancing labour productivity in family firms, as family firm employees will have high expectancies, instrumentalities, and valences towards CPS. Moreover, R&D and capital intensities are explored as strategic contexts for further determining CPS effects on labour productivity in family firms. The findings lend support for CPS having a significant, positive impact on family firms’ labour productivity, and demonstrate a three-way interaction indicating that the strongest, positive effects of CPS on family firms’ labour productivity occurs when R&D intensity is high (versus low). However, our prediction of a three-way interaction involving capital intensity was not supported.