Reward management in small-medium knowledge-intensive firms. Evidence from Italy.

The aim of this chapter is to consider reward management in small and medium-sized enterprises (SMEs) with a specific focus on knowledge-intensive firms (KISs). Our interest towards SMEs with knowledge orientation is motivated by some reasons. One of them is, of course, the important role SMEs play in many countries (Acs et al. 1997). It is true that SMEs play an important role in economic development. Enterprises belonging to this dimensional class are relevant everywhere in terms of economic activity, employment, innovation and wealth creation (Acs et al. 1997; Katsikeas et al. 1998) and, in general, it underscores the belief that attention towards the small business sector embodies an important policy priority (Bell et al. 2004). Recent data indicate that in OECD economies, SMEs comprise 95% of private companies and, among them, 76% are working in the services industry (OECD 2014). Other estimates also suggest that SMEs account for 98.9% of the total number of businesses in China (Singh et al. 2009) and the trend is similar in many other countries of the world. With regard to Italy, we have to remember that there is a long tradition of studies on this group of enterprises (Ciambotti and Palazzi 2015; Corbetta and Montemerlo 1999; Corbetta 2000: Cortesi et al. 2012), which constitutes a large part of the national productive system. According to recent data, SMEs in Italy constitute 99.8% of the national productivity (ISTAT 2015). Two main issues are critical and under-investigated in the current literature on SMEs. One is the importance of a qualified workforce for SMEs and of those organizational practices favouring the motivation of workers. Despite the significance of human capital and its engagement in SMEs, hardly any empirical research has been done on them (Behrends 2007; Bacon and Hoque 2005; Heneman et al. 2000; Michiels 2017). The other gap highlighted in the debate on SMEs is the prevailing focus on ‘traditional’ firms, while literature on ‘knowledge-intensive’ firms is scarce and the topic needs to be further investigated (Bell et al. 2004). KIFs are firms in which the workforce is largely composed of well-educated and qualified employees and most work is intellectual in nature (Swart and Kinnie 2003; Alvesson 2000). Since the increasing relevance of knowledge in the present economy, KIFs are emerging as dominant and highly successful (Barney 1991; Grant 1997; Kogut and Zander 1992; Teece 2000; Wright et al. 1994). This research is therefore aimed at investigating how small and medium-sized KIFs manage their human resources, since they constitute an important resource for their organizational success (Behrends 2007). In an attempt to respond to the above calls, the elements that may favour the contribution of the workforce to the overall performance of both traditional and KIFs firms will be analysed. In this sense, this chapter investigates monetary and non-monetary rewards and their specific motivational roles in affecting employee behaviour. Research on reward management, applied mainly among large firms, stresses on the importance of non-monetary aspects of remuneration and suggests that knowledge workers are driven mainly by an intrinsic motivation (Frey and Stutzer 2006). At the same time, in managerial practice, non-monetary schemes are becoming increasingly popular while the efficacy of this kind of rewarding scheme has not yet been proven. The purpose of this chapter is twofold: firstly, to understand if non-monetary reward practices prevail in KI-SMEs, and, secondly, to verify whether they are effective in spurring organizational performance or risk being a ‘dangerous’ fad. To support our reasoning at the theoretical level, we provide evidence from a survey conducted on a sample of 95 SMEs in different industries in Italy. Results of a regression analysis show greater use of non-monetary incentives for firms with higher levels of knowledge intensity, compared to non-knowledge-intensive ones. Moreover, our results demonstrate that the overuse of non-monetary rewards may produce adverse effects. Some managerial actions are being proposed considering this outcome.