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Personal Relations and their Effect on Behavior in an Organizational Setting: An Experimental Study

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Abstract

We study how personal relations affect performance in organizations. In the experimental game we use a manager has to assign different degrees of decision power to two employees. These two employees then have to make distributive decisions which affect themselves and the manager. Our focus is on the effects on managers' assignment of decision power and on employees' distributive decisions of one of the employees and the manager knowing each other personally. Our evidence shows that managers tend to favor employees that they personally know and that these employees tend, more than other employees, to favor the manager in their distributive decisions. However, this behavior does not affect the performance of the employees that do not know the manager. All these effects are independent of whether the employees that know the manager are more or less productive than those who do not know the manager. The results shed light on discrimination and nepotism and its consequences for the performance of family firms and other organizations.

Suggested Citation

  • Jordi Brandts & Carles Solà, 2006. "Personal Relations and their Effect on Behavior in an Organizational Setting: An Experimental Study," UFAE and IAE Working Papers 692.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  • Handle: RePEc:aub:autbar:692.07
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    Cited by:

    1. Natalia Montinari & Antonio Nicolò & Regine Oexl, 2016. "The gift of being chosen," Experimental Economics, Springer;Economic Science Association, vol. 19(2), pages 460-479, June.
    2. Dimant, Eugen, 2015. "On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity," MPRA Paper 68732, University Library of Munich, Germany.
    3. Hammermann, Andrea & Mohnen, Alwine & Nieken, Petra, 2012. "Whom to Choose as a Team Mate? A Lab Experiment about In-Group Favouritism," IZA Discussion Papers 6286, Institute of Labor Economics (IZA).
    4. Angelovski, Andrej & Brandts, Jordi & Sola, Carles, 2016. "Hiring and escalation bias in subjective performance evaluations: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 121(C), pages 114-129.
    5. Agnieszka Rusinowska & Vassili Vergopoulos, 2016. "Ingratiation and Favoritism in Organizations," Documents de travail du Centre d'Economie de la Sorbonne 16010, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Gabriele Chierchia & Fabio Tufano & Giorgio Coricelli, 2020. "The differential impact of friendship on cooperative and competitive coordination," Theory and Decision, Springer, vol. 89(4), pages 423-452, November.
    7. Tom Lane, 2015. "Discrimination in the laboratory: a meta-analysis," Discussion Papers 2015-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    8. Glenn Dutcher, 2011. "How does the social distance between an employee and a manager affect employee competition for a reward?," Working Papers 2011-29, Faculty of Economics and Statistics, University of Innsbruck.
    9. Saima Naeem & Asad Zaman, 2013. "For Love or Money? Motivating Workers," PIDE-Working Papers 2013:90, Pakistan Institute of Development Economics.
    10. Banuri, Sheheryar & Eckel, Catherine, 2012. "Experiments in culture and corruption : a review," Policy Research Working Paper Series 6064, The World Bank.
    11. Robin, Stéphane & Rusinowska, Agnieszka & Villeval, Marie Claire, 2014. "Ingratiation: Experimental evidence," European Economic Review, Elsevier, vol. 66(C), pages 16-38.
    12. Alistair Munro, 2018. "Intra†Household Experiments: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 134-175, February.
    13. Abeler, Johannes & Altmann, Steffen & Goerg, Sebastian J. & Kube, Sebastian & Wibral, Matthias, 2011. "Equity and Efficiency in Multi-Worker Firms: Insights from Experimental Economics," IZA Discussion Papers 5727, Institute of Labor Economics (IZA).
    14. Jiang, Jiang & Li, Sherry Xin, 2019. "Group identity and partnership," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 202-213.

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    More about this item

    Keywords

    Family firms; nepotism; corporate governance; procedural fairness; experiments;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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