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This study examines the impact of business volatility on employee performance. We posit that employees work harder in a more volatile business environment as prior research links business volatility to increased use of performance-based compensation systems, which may result in better employee performance. Our results suggest that business volatility has a significant and positive impact on employee performance. Furthermore, we find that the relationship between business volatility and employee performance is stronger for larger firms and firms with higher labor intensity.

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The American Journal of Business


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Business Commons