Teresa Dickler, Phillips University of Marburg

From Silos to Savings: Inclusive Incentives and Emissions Reductions in Diversified Firms

Understanding how diversified firms leverage internal resource markets to create corporate advantage remains a central question. We argue that inclusive incentives—firm-wide incentive schemes targeting the entire workforce—are an internal organizational practice that enhances internal market effectiveness by facilitating knowledge flows and coordination across hierarchical levels and business units. Using a longitudinal dataset of 4,828 firm-year observations from S&P 1500 firms (2009–2022), we examine the relationship between climate-related inclusive incentives and environmental performance. Inclusive incentives are associated with lower carbon emissions and are more effective than management-only incentives. We theorize and show that their effectiveness depends on organizational context, with the strongest effects in diversified firms, particularly those with unrelated businesses. In these firms, inclusive incentives partially substitute for weaker structural integration by enabling headquarters to access dispersed operational knowledge and coordinate emission-reduction efforts.