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Product diversification, performance criteria and compensation at the corporate manager level

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  • Nancy Knox Napier
  • Mark Smith

Abstract

The paper describes a test of the Galbraith and Nathanson (1978) model of stages of development. In particular, Galbraith and Nathanson hypothesized that in highly diverse firms: (1) performance criteria are more objective, (2) bonus is a larger proportion of total compensation, and (3) bonus allocation decisions are based more on an objective ‘formula’ of performance evaluation than on the discretion of the firm President or Chief Executive Officer. The study compared the three variables across three diversification groups (high, medium, low), based on Rumelt's (1974) classification (single product, vertically integrated, dominant, related, unrelated, and conglomerate). The study used written surveys of corporate managers in Fortune 1000 manufacturing firms.

Suggested Citation

  • Nancy Knox Napier & Mark Smith, 1987. "Product diversification, performance criteria and compensation at the corporate manager level," Strategic Management Journal, Wiley Blackwell, vol. 8(2), pages 195-201, March.
    • Handle: RePEc:bla:stratm:v:8:y:1987:i:2:p:195-201
    DOI: 10.1002/smj.4250080210
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    Cited by:

    1. Christian Grund & Tanja Hofmann, 2019. "The dispersion of bonus payments within and between firms," Journal of Business Economics, Springer, vol. 89(4), pages 417-445, June.
    2. Yu Chen & Yuandi Wang & Shan Chen, 2021. "Are Chinese Executives Rewarded or Penalized by the Operation of High-Speed Railways?," Sustainability, MDPI, vol. 13(21), pages 1-14, October.
    3. Yu-Chi Wu & Yi-Feng Yang & Cheng-Se Hsu, 2022. "Relationship Between Innovative Leadership And Employee Service Innovation Behavior," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 16(1), pages 17-24.
    4. Stefano Cabras & J. D. Tena, 2023. "Implicit institutional incentives and individual decisions: Causal inference with deep learning models," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(6), pages 3739-3754, September.
    5. Cardinal, Laura B. & Opler, Tim C., 1995. "Corporate diversification and innovative efficiency an empirical study," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 365-381, April.
    6. Heinz, Matthias & Khashabi, Pooyan & Zubanov, Nick & Kretschmer, Tobias & Friebel, Guido, 2017. "Heterogeneous Effects of Performance Pay with Market Competition: Evidence from a Randomized Field Experiment," CEPR Discussion Papers 12474, C.E.P.R. Discussion Papers.
    7. Tzu-Ching Weng & Chieh-wen kuo Chem & Pei-Jung Lee, 2022. "The Influence Of Management Compensation On Diversification Strategy," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 16(1), pages 17-40.

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