High-Powered Incentives in Hierarchies: The Determinants of Incentive Intensity in Group-Based Rewards

Posted: 8 May 1997

See all articles by Todd Zenger

Todd Zenger

University of Utah

C.R. Marshall

Upper Iowa University

Date Written: March 1996

Abstract

Highly incentive intensive rewards have been linked both theoretically and empirically to higher effort. Nonetheless, historically the incentive intensity of individual rewards has been quite modest in most hierarchies. In an effort to escalate the incentive intensity of rewards, managers have increasingly implemented pay systems which reward individuals for group performance. While the determinants of incentive intensity for individual rewards have been widely examined, the determinants of incentive intensity for group- based rewards remain unexplored. In this paper, we draw upon literature in economics and social psychology to develop a theory of the determinants of incentive intensity in group rewards. Our derived hypotheses are tested using data from a large sample of 663 group pay plans in the US private sector.

JEL Classification: J33, D23

Suggested Citation

Zenger, Todd R. and Marshall, C.R., High-Powered Incentives in Hierarchies: The Determinants of Incentive Intensity in Group-Based Rewards (March 1996). Available at SSRN: https://ssrn.com/abstract=2957

Todd R. Zenger (Contact Author)

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)

C.R. Marshall

Upper Iowa University

PO Box 1857
Fayette, IA 52142
United States

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