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On the Merit of Equal Pay: When Influence Activities Interact with Incentive Setting

Author

Listed:
  • Brice Corgnet

    (Chapman University, Economic Science Institute)

  • Ludivine Martin

    (Luxembourg Institute of Socio-Economic Research)

  • Peguy Ndodjang

    (Luxembourg Institute of Socio-Economic Research)

  • Angela Sutan

    (ESC Dijon, LESSAC)

Abstract

Influence costs models predict that organizations should limit managerial discretion to deter organizational members from engaging in wasteful politicking activities. We test this conjecture in a controlled, yet realistic, work environment in which we allow employees to influence managers’ decisions about rewards. We find that influence activities are pervasive and significantly lower organizational performance. Organizational performance suffers because principals offer weaker incentives when influence activities are allowed than when they are not. Importantly, we show that equal pay incentive schemes perform better when influence activities are available than when they are not. Our results thus support the idea that prevalent politicking activities may account for the widespread use of bureaucratic, and apparently inefficient, compensation rules in organizations.

Suggested Citation

  • Brice Corgnet & Ludivine Martin & Peguy Ndodjang & Angela Sutan, 2015. "On the Merit of Equal Pay: When Influence Activities Interact with Incentive Setting," Working Papers 15-09, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:15-09
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Influence activities; incentive theory; theory of the firm; organizational economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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