Why Can’t We Be Friends?! The Effects of In-Group Identity and Clarity of the BonusDeterminationCriteria on Supervisors’DiscretionaryBonusAdjustments

• In Event: Social Ties, Team Identity, and Political Bias

Abstract

This study examines the influence of in-group identity between supervisors and subordinates and the clarity of the bonus determination criteria on supervisors’ discretionary adjustments of subordinates’ bonus compensation through the lenses of social network theory. Using field data from a Chinese manufacturing company, we find that in-group sales agents receive higher bonus awards and that this effect is more pronounced when there is high clarity of the bonus determination criteria. Additional analysis shows that these effects hold for higher-tenured sales agents and in more economically prosperous regions. Finally, we find that higher bonus awards are positively (negatively) associated with in-group sales agents’ future performance when there is low (high) clarity of the bonus determination criteria. Our findings provide implications for both practice and research on incentive contracting.

Authors

• Joanna L Ho, University of California, Irvine

• Cody Lu, University of Massachusetts-Amherst

• Anne Wu, National Chengchi University