A Multilevel Analysis of the Use of Individual Pay-for-Performance Systems

Paul Gooderham, Mark Fenton-O'Creevy, Richard Croucher, Michael Brookes

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)
79 Downloads (Pure)

Abstract

Compensation systems, such as individualized pay-for-performance (I-PFP) schemes for employees, represent an important approach to aligning employer-employee interests. However, the adoption of I-PFP is much less common in many countries than in the United States. Employing a multilevel analysis of over 4,000 firms in 26 countries, we explore determinants of its adoption. At the country level, we distinguish between cultural and institutional (labor regulation institutions) influences. At the firm level, we distinguish firms that view human resources as strategically important and firms that are foreign owned. On the one hand, our findings indicate that both cultural and institutional effects at the country level significantly influence the adoption of I-PFP. On the other hand, senior managers’ agency counts. We find the effect of labor regulation on I-PFP to be mediated by its effects on labor union influence, and we find the effects of culture on I-PFP to be entirely mediated by labor regulation and (country-level) union influence.
Original languageEnglish
Pages (from-to)1479-1504
Number of pages26
JournalJournal of Management
Volume44
Issue number4
DOIs
Publication statusE-pub ahead of print - 21 Oct 2015

Keywords

  • compensation, bonuses, and benefits
  • culture
  • institutional theory

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