Salesforce Compensation: An Empirical Investigation of Factors Related to Use of Salary versus Incentive Compensation

The transaction cost analysis framework is integrated with prescriptions from the sales management literature to develop a model that indicates the role of salary in a sales compensation plan for industrial firms. The descriptive power of the model is examined by surveying compensation practices in 161 firms. The results indicate that the transaction cost framework is somewhat useful in describing the use of salary, but the framework does not consider some important aspects guiding salary versus incentive compensation decisions.