Search results

In this paper, we review the literature on pay variation (e.g., pay dispersion, pay compression, pay range) in organizations. Pay variation research has increased markedly in the past two decades and much progress has been made in terms of understanding its consequences for individual, team, and organizational outcomes. Our review of this research exposes several levels-related assumptions that have limited theoretical and empirical progress. We isolate the issues that deserve attention, develop an illustrative multilevel model, and offer a number of testable propositions to guide future research on pay structures.

This study aims to re-examine the impact of economic policy uncertainty (EPU) on firm innovation. Studies on how EPU affects firm innovation have been inconclusive. The authors clarified the curvilinear relationship between EPU and firm innovation and examined the moderating effects of managerial pay gaps, specifically vertical pay disparity and horizontal pay dispersion.

This study’s analyses used data collected from Chinese listed companies from 2007 to 2019.

The authors found an inverted U-shaped relationship between EPU and firm innovation. Furthermore, vertical pay disparity strengthens the curvilinear relationship, while horizontal pay dispersion weakens it.

First, politicians should avoid adjusting economic policies too frequently because the high EPU levels created by frequent adjustments can inhibit business innovation. Second, firms should be aware that EPU creates opportunities for leapfrogging. In particular, firms can incentivize executives to take advantage of the valuable growth opportunities presented by EPU by widening vertical pay disparities and avoiding excessive horizontal pay dispersion.

First, the authors analyze not only the positive effects of lower EPU on firm innovation but also the negative impacts of higher EPU to examine EPU’s “double-edged sword” effect on firm innovation. Second, the investigation of vertical pay disparity and horizontal pay dispersion as moderating variables sheds new light on the equivocal research findings regarding the EPU–firm innovation relationship and clarifies the boundary conditions of the double-edged sword effect of EPU on firm innovation.

Explained pay dispersion theory (Shaw, Gupta, & Delery, 2002) contends that the consequences of pay dispersion depend on two critical contingencies: (1) the presence of legitimate or normatively acceptable dispersion-creating practices, and the (2) identifiability of individual contributions. In this chapter, the first 20 years of empirical evidence and theoretical offshoots of this theory are reviewed. Other recent studies on the outcomes of horizontal and vertical pay dispersion are also evaluated. The review concludes with an evaluative summary of the literature and the identification of several potential fruitful areas for future research.

The purpose of this paper is to answer the question: What happens to the outcomes of pay dispersion when the employees own stock in their own company?

The data set consisted of over 20,000 employee surveys. Pay dispersion was measured with the Gini coefficient. The outcome variables were attitudes and behaviors with numerous controls. The moderation effect of employee ownership was investigated at the individual and group level using multilevel regression analysis.

Most hypothesized outcomes did not yield statistically significant results. The results that were statistically significant had two patterns: first, higher pay dispersion was consistently associated with improved attitudes and behaviors; and second, employee ownership moderated the outcomes of pay dispersion for certain outcomes and job types (e.g. perceptions of company fairness among administrative support personnel, or absenteeism and production personnel). There was no evidence to support a link between pay dispersion and attitudes across job types (vertical), only within job types (horizontal).

All the data were self-reported in surveys. Attitudes were measured with single items rather than validated scales. The data were cross-sectional, so no causality can be inferred.

While both higher pay dispersion and employee ownership can motivate employees, the interaction between them can be negative, especially in a cooperative environment. Consideration should be given to this when designing compensation packages.

There was a surprisingly strong link between higher pay differentials and improved attitudes, suggesting that the opportunity for higher pay is more influential than any feelings of inequity.

The effect of employee ownership on the outcomes of pay dispersion has never been investigated. This should be valuable given how widely higher pay is used to attract, retain and motivate employees (leading to pay dispersion) as well as how increasingly popular employee ownership is becoming.

While the effect of vertical pay dispersion on the voluntary turnover rate of vice presidents (VPs) has received attention, the existing research conclusions are still divided. Therefore, this study aims to explore the relationship between vertical pay dispersion and voluntary turnover rate of VPs in a Chinese context using data from listed firms.

Integrating tournament theory and social comparison theory, this study examines the non-linear effect of vertical pay dispersion on VPs’ voluntary turnover rates using empirical data from Chinese A-share listed firms from 2007 to 2016.

The results reveal a U-shaped relationship between vertical pay dispersion and the voluntary turnover rate of VPs. After further incorporating the moderating effect of the board governance structure, the effect is found to be enhanced in firms with more efficient board governance (i.e. smaller board size, higher board turnover and higher proportion of outside directors). Further analysis indicates that the aforementioned conclusions mainly exist in non-state-owned enterprises rather than state-owned enterprises.

The findings deepen the understanding of the costs and benefits associated with vertical pay dispersion, enrich the research findings on pay dispersion and contribute to the integration of previously inconsistent findings.

This study aims to examine whether the pay gap between the chief executive officer (CEO) and non-executive employees affects the firm’s research and development (R&D) efficiency.

The dependent variable is the firm’s R&D efficiency, defined as a percentage increase in revenue from a 1-per cent increase in R&D spending. The main independent variable is the CEO-employee pay gap, defined as the ratio of annual total compensation for the CEO to the average of non-executive employees of the firm. The authors estimate fixed-effects models to examine the association between R&D efficiency and the pay gap between CEO and non-executive employees.

Results indicate a negative and significant association between R&D efficiency and CEO-employee pay gap, which suggests that a wider pay gap reduces employee motivation and effort, consistent with pay equity theory. We also find that the CEO-employee pay gap negatively moderates the relationship between employee pay growth and R&D efficiency

Recently enacted pay gap disclosure requirements mandated by the Dodd-Frank Act will make the disparity between CEO and non-executive compensation more salient. This study provides evidence of a firm outcome associated with that disparity.

This study is among the first to investigate the impact of the pay gap on R&D efficiency, a firm outcome not previously explored in the literature. This study also investigates CEO-employee pay gap’s role as a factor that moderates the effects of employee pay growth and institutional ownership on R&D efficiency

Based on the tournament theory and the principal agent theory, this study aims to empirically investigate how top management team (TMT) vertical pay disparity (the pay disparity between the CEO and non-CEO executives) influences firm innovation performance.

This study empirically tested the hypotheses based on a sample of listed high-tech companies in China during the period between 2007 and 2018.

TMT vertical pay disparity promotes innovation performance; CEO power undermines the positive effect of TMT vertical pay disparity on innovation performance; the negative moderating effect of CEO power is mitigated by board age and gender and educational levels, whereas the proportion of female directors has no such effect at any significant level.

This study uniquely contributes to the theoretical and empirical development of tournament theory and the principal agent theory.

Although previous research has investigated how performance feedback may affect firms’ strategic actions, their findings has been inconsistent. The relationship between performance feedback and firms’ strategic activities thus appears complex. Moreover, the authors contend that it may vary with the measurement strategies employed (i.e. social or historical feedback, operationalizations of strategic actions or accounting- and market-based performance indicators) and the national contexts.

Therefore, the current article presents a comprehensive meta-analysis of prior research, including 1,637,817 sample observations from 101 studies that span more than 18 countries.

The results indicate that (1) performance that are below or above aspirational levels generally has a positive relationship with firms’ strategic actions; (2) these relationships are contingent on the implementation forms taken by the key variables, such as performance feedback, strategic actions and performance indicators; and (3) the relationships are much stronger in countries where managerial discretion is greater.

The findings contribute to the clarification of long-standing theoretical and empirical debates regarding the relationship between performance feedback and strategic actions, as well as some pertinent directions for future research.

The impact of paid tax return preparers on the horizontal equity (HE) of the federal tax system has significance for regulatory and tax policy reasons. Using multiple analytical techniques to consider data from the Statistics of Income Division's 2000 Individual Model File (IMF), this study shows that the HE measure is generally greater (implying less HE) for the paid-preparer returns than for the self-prepared returns, even after controlling for complexity and other variables that may differ systematically by tax preparation mode.