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This paper analyses the effects of combined implementation of gain sharing wage incentives and continuous process improvement on productivity growth in the apparel industry. Results were obtained through empirical research conducted in a Serbian apparel manufacturer - Javor. A five step research approach was designed and applied in Javor, where productivity was continuously measured over a five year period. Results show a significant increase in productivity in Javor by the end of the fifth year, even though productivity was in decline in the apparel sector. The results were statistically tested, showing that productivity gains can really be attributed to combined implementation of gain sharing and continuous process improvement. The paper has significant practical implications, since it suggests that wage incentives can be used as an efficient tool for motivating employees to take an active role in improvement efforts while relying on existing knowledge and resources. [ABSTRACT FROM AUTHOR]