Incentives, Social Comparison Costs, and the Proximity of Envy's Object

35 Pages Posted: 7 Mar 2015 Last revised: 10 Mar 2015

See all articles by Tomasz Obloj

Tomasz Obloj

HEC Paris - Strategy & Business Policy

Todd Zenger

University of Utah

Date Written: March 5, 2015

Abstract

We investigate the mechanisms that shape social comparison in organizations and generate social comparison costs. Drawing on the notions of inequity aversion and envy, we argue that heterogeneity in the strength and type of incentives provides an impetus for envy, and that the resulting social comparison costs are shaped not only by the magnitude of this impetus, but the distance of envy’s objects. In other words, the more proximate socially, structurally and geographically are those one envies the larger the costly behavioral response. To test our predictions, we use a quasi-experimental event during which outlets of a retail bank, previously operating under homogenous incentives, were assigned to four distinct tournament groups with differing ex ante probabilities of winning a prize — an event that provides envy’s impetus. We then explore how, for each outlet, the proximity of those assigned to more advantaged outlets — objects of envy — shape productivity responses. We find that organizational units with more socially, geographically, and structurally proximate peers assigned to ‘better’ tournament groups decreased their productivity, when compared to peers whose objects of envy were more socially, geographically, and structurally distant. We also show that these effects are stable over time. We discuss implications of these results for organizational design and boundaries.

Keywords: Incentives, Social Comparison Costs, Envy, Organization Design

Suggested Citation

Obloj, Tomasz and Zenger, Todd R., Incentives, Social Comparison Costs, and the Proximity of Envy's Object (March 5, 2015). HEC Paris Research Paper No. SPE-2015-1085. Available at SSRN: https://ssrn.com/abstract=2574248 or http://dx.doi.org/10.2139/ssrn.2574248

Tomasz Obloj (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

Todd R. Zenger

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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