Publication: Right on the Money? The Contingent Effects of Strategic Orientation and Pay System Design on Firm Performance
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Date
2018-09-14
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Wiley
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Abstract
This paper extends prior research on the performance implications of the fit between a firm’s strategic orientation and its pay system design. Whereas prior research has shown that matching the pay system design to the strategic orientation of the firm generally contributes to higher performance, most studies have examined the pay systems of the upper echelons and employees separately. Based on an analysis that accounts for both horizontal and vertical pay dispersion, we find that whereas growth-oriented firms (prospectors) tend to benefit from high horizontal pay dispersion, efficiency-oriented firms (defenders) perform better with high vertical pay dispersion and low relative base pay. Overall, our findings contribute to an improved understanding of how to optimize the pay systems of firms with different strategic orientations.
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Attribution 4.0 International
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IE Business School
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Tenhiälä, A., & Laamanen, T. (2018). Right on the money? The contingent effects of strategic orientation and pay system design on firm performance. Strategic Management Journal, 39(13), 3408-3433. https://doi.org/10.1002/smj.2953.