The Effect of Promotion Tournament on Organizational Labor Productivity Enhancement: The Case of Kale Company
Subject Areas : Economyrazieh kardgar 1 , Ghahraman Abdoli 2 , ءMohammad Hossein Dehghani Firouzabadi 3
1 - PhD candidate, Economics Department, Faculty of Economics, University of Mazandaran, Mazandaran, Iran
2 - Professor in Economics, Economics Department, Faculty of Economics, University of Tehran, Tehran, Iran
3 - Assistant Professor in Economics, Economics Department, Faculty of Economics, University of Tehran, Tehran, Iran
Keywords: Labour Productivity, Reward, Economic Firms, Promotion Tournament,
Abstract :
The theory of tournament which seeks a way of enhancing labour motivation and promote their performance through structuring remunerations might be one of the most common strategies to promote employees’ effort and eliminate employers’ asymmetric learning. The structure of the reward is designed in such a way that upon observing the production level, the amount of reward is proportionate to varying amount of effort different laborers invest. The purpose of this research was to consider the extent to which the tournament theory might be employed to promote Iranian employees’ motivation and increase their performance, and thereby, that of national organizations. The research data were collected from a sample of employees at Kalleh Company in 2016. The research questions were answered using Multiperson Tournament with N employees and N reward. The findings indicated that keeping the reward constant, the tournament size could not significantly impact the effort level nor could the amount of reward. Hence, neither of these might be considered as motivation promoting devices to optimize performance. On the other hand, firms prefer larger tournaments with regard to the constant cost required for executing them.
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Audas, R., Barmby, T., & Treble, J. (2004). Luck, effort, and reward in an organizational hierarchy, Journal of Labor Economics, 22(2), 379–396.
Baker, G. P., Jensen, M. C., & Murphy, K. J. (1988). Compensation and Incentives: Practice vs. Theory. The Journal of Finance, 43(3), 593-616.
Bognanno, M., & Melero, E. (2015). Promotion Signals, Experience, and Education. Journal of Economics & Management Strategy, 25(1), 111-132.
Chang, C., & Wang, Y. (1996). Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited. Journal of Labor Economics, 14(3), 505-519.
Connelly, L ., Tihanyi , L ., Crook , T ., & Gangloff , A .(2014). Tournament Theory: Thirty Years of Contests and Competitions, Journal of Management, 40(1), 16– 47.
DeVaro, J. & Kauhanen , A.(2016), An “Opposing Responses” Test of Classic versus Market-Based Promotion Tournaments ,Journal of Labor Economics, 34(3), 747-779.
DeVaro, J.& Waldman. M. (2012), “The Signaling Role of Promotions: Further Theory and
Empirical Evidence,” Journal of Labor Economics, 30(1), 91-147.
Drago, R., & Garvey, G. T. (1998). Incentives for helping on the job: theory and evidence, Journal of Labor Economics, 16(1), 1-25.
Ekinci, E. (2011). Bonus Payments in a Corporate Hierarchy: Theory and Evidence, Mimeo, Cornell University, Ithaca, NY, 1-54.
Ekinci, E. & Waldman, M.(2015). Bonuses and promotion tournaments: Theory and evidence, Cornell University, Ithaca, NY, 1-65.
Flabbi, L. & Andrea, I.( 2001). Productivity, seniority and wages: New evidence from personnel data. Labour Economics 8(3), 359–387.
Josse, D., Dur, R., Non, A., & Verbeke., W.( 2015). The effects of prize spread and noise in elimination tournaments: A natural field experiment. Journal of Labor Economics 33(3), 521–569.
Garvey, G., & Swan, P. L. (1992). Managerial objectives, capital structure, and the provision of work incentives. Journal of Labor Economics, 10(4), 357-379.
Gibbons, R., & Katz, F. (1991). Layoffs and lemons. Journal of Labor Economics, 9(4), 351-380
Gibbons, R. S., & Waldman, M. (2003). Enriching a Theory of Wage and Promotion Dynamics inside Firms. Unpublished paper, 24(1), 59-107.
Ghosh, S., & Waldman, M. (2010). Standard promotion practices versus up-or-out contracts, The Rand Journal of Economics, 41(2), 301-325
Green, J. R., & Nancy L. S. (1983). A comparison of tournaments and contracts. Journal of Political Economy, 91(3), 349-364
Gürtler, O., & Münster, J. (2010). Sabotage in dynamic tournaments, Journal of Mathematical Economics, 46(2), 179–190.
Habib Pour Getabi, K., & Safarishali, R. (2012). Comprehensive Manual for Using SPSS In Survey Researches, second edition, Loye publishing, (In Persian).
Herbertz, C., & Sliwka, D. (2013). When higher prizes lead to lower efforts- The impact of favoritism in tornament, Economics letters, 120(2), 188-191
Ivankovic .M. (2007). The tournament model: an empirical investigation of the ATP Tour, Journal of Economics and Business, 25(1), 83-111
Kahn, L.B. (2013). Asymmetric Information between Employers, American Economic Journal: Applied Economics, 5(4), 165-205.
Kar. S. & Datta, D. (2015). Asymmetric Information in the Labor Market, Volume 25 of the series India Studies in Business and Economics, 1-38.
Kato, T. & Long, C. (2011). Tournament and managerial incentives in china’s listed firms: New evidence, China Economic Review, 22(1), 1-10.
Lazear, E. P. (1989). Pay Equality and Industrial Politics, Journal of Political Economy, 97(3), 561-80.
Lazear, E.P. & Rosen, S. (1981). Rank-Order Tournaments as Optimum Labor, Journal of Political Economy, 89(5), 841-864.
Lazear, E. and P. Oyer (2012), “Personnel Economics, “ in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics, Princeton University Press, pp. 479-519.
Meyer, M. A. (1992). Biased contests and moral hazard: implications for career profiles, Annales d' Economie et de Statistique, 25(26), 165–187
Orrison, A., Schotter, A., & Weigelt, K. (2004). Multiperson Tournaments: An Experimental Examination, Journal of Management Science, 50(2), 268-279.
O'Keefe, M., Viscusi, K., & Zeckhauser, R. (1984). Economic contests: Comparative reward schemes. Journal of Labor Economics, 2(1), 27-56.
Reiss, R. D. (1989). Approximate Distributions of Order Statistics, Springer, New York, 1-44.
Schonberg, U.) 2007. (Testing for Asymmetric Employer Learning, Journal of Labor Economics, )25), 651-691.
Sunde, U. (2003). Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data, Journal of Applied Economics, 41(25), 3199-3208.
Waldman, M. (2013). Classic promotion tournaments versus market-based tournaments, International Journal of Industrial Organization, 31(3), 198-210.
Zabojnik, J., & Bernhardt, D. (2001). Corporate tournaments, human capital acquisition, and the firm size-wage relation. Review of Economic Studies, 68(3), 693–716.
Zhang, Y.) 2007(. Employer Learning Under Asymmetric Information: The Role of Job Mobility, Mimeo, Indiana University Purdue University (IUPUI), 1-42.
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Auronen, A .(2003). Asymmetric Information: Theory and Applications, Seminar in Strategy and International Business, Helsinki University of Technology Department of Industrial Engineering and Management, 1-35.
Audas, R., Barmby, T., & Treble, J. (2004). Luck, effort, and reward in an organizational hierarchy, Journal of Labor Economics, 22(2), 379–396.
Baker, G. P., Jensen, M. C., & Murphy, K. J. (1988). Compensation and Incentives: Practice vs. Theory. The Journal of Finance, 43(3), 593-616.
Bognanno, M., & Melero, E. (2015). Promotion Signals, Experience, and Education. Journal of Economics & Management Strategy, 25(1), 111-132.
Chang, C., & Wang, Y. (1996). Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited. Journal of Labor Economics, 14(3), 505-519.
Connelly, L ., Tihanyi , L ., Crook , T ., & Gangloff , A .(2014). Tournament Theory: Thirty Years of Contests and Competitions, Journal of Management, 40(1), 16– 47.
DeVaro, J. & Kauhanen , A.(2016), An “Opposing Responses” Test of Classic versus Market-Based Promotion Tournaments ,Journal of Labor Economics, 34(3), 747-779.
DeVaro, J.& Waldman. M. (2012), “The Signaling Role of Promotions: Further Theory and
Empirical Evidence,” Journal of Labor Economics, 30(1), 91-147.
Drago, R., & Garvey, G. T. (1998). Incentives for helping on the job: theory and evidence, Journal of Labor Economics, 16(1), 1-25.
Ekinci, E. (2011). Bonus Payments in a Corporate Hierarchy: Theory and Evidence, Mimeo, Cornell University, Ithaca, NY, 1-54.
Ekinci, E. & Waldman, M.(2015). Bonuses and promotion tournaments: Theory and evidence, Cornell University, Ithaca, NY, 1-65.
Flabbi, L. & Andrea, I.( 2001). Productivity, seniority and wages: New evidence from personnel data. Labour Economics 8(3), 359–387.
Josse, D., Dur, R., Non, A., & Verbeke., W.( 2015). The effects of prize spread and noise in elimination tournaments: A natural field experiment. Journal of Labor Economics 33(3), 521–569.
Garvey, G., & Swan, P. L. (1992). Managerial objectives, capital structure, and the provision of work incentives. Journal of Labor Economics, 10(4), 357-379.
Gibbons, R., & Katz, F. (1991). Layoffs and lemons. Journal of Labor Economics, 9(4), 351-380
Gibbons, R. S., & Waldman, M. (2003). Enriching a Theory of Wage and Promotion Dynamics inside Firms. Unpublished paper, 24(1), 59-107.
Ghosh, S., & Waldman, M. (2010). Standard promotion practices versus up-or-out contracts, The Rand Journal of Economics, 41(2), 301-325
Green, J. R., & Nancy L. S. (1983). A comparison of tournaments and contracts. Journal of Political Economy, 91(3), 349-364
Gürtler, O., & Münster, J. (2010). Sabotage in dynamic tournaments, Journal of Mathematical Economics, 46(2), 179–190.
Habib Pour Getabi, K., & Safarishali, R. (2012). Comprehensive Manual for Using SPSS In Survey Researches, second edition, Loye publishing, (In Persian).
Herbertz, C., & Sliwka, D. (2013). When higher prizes lead to lower efforts- The impact of favoritism in tornament, Economics letters, 120(2), 188-191
Ivankovic .M. (2007). The tournament model: an empirical investigation of the ATP Tour, Journal of Economics and Business, 25(1), 83-111
Kahn, L.B. (2013). Asymmetric Information between Employers, American Economic Journal: Applied Economics, 5(4), 165-205.
Kar. S. & Datta, D. (2015). Asymmetric Information in the Labor Market, Volume 25 of the series India Studies in Business and Economics, 1-38.
Kato, T. & Long, C. (2011). Tournament and managerial incentives in china’s listed firms: New evidence, China Economic Review, 22(1), 1-10.
Lazear, E. P. (1989). Pay Equality and Industrial Politics, Journal of Political Economy, 97(3), 561-80.
Lazear, E.P. & Rosen, S. (1981). Rank-Order Tournaments as Optimum Labor, Journal of Political Economy, 89(5), 841-864.
Lazear, E. and P. Oyer (2012), “Personnel Economics, “ in R. Gibbons and J. Roberts (eds.), The Handbook of Organizational Economics, Princeton University Press, pp. 479-519.
Meyer, M. A. (1992). Biased contests and moral hazard: implications for career profiles, Annales d' Economie et de Statistique, 25(26), 165–187
Orrison, A., Schotter, A., & Weigelt, K. (2004). Multiperson Tournaments: An Experimental Examination, Journal of Management Science, 50(2), 268-279.
O'Keefe, M., Viscusi, K., & Zeckhauser, R. (1984). Economic contests: Comparative reward schemes. Journal of Labor Economics, 2(1), 27-56.
Reiss, R. D. (1989). Approximate Distributions of Order Statistics, Springer, New York, 1-44.
Schonberg, U.) 2007. (Testing for Asymmetric Employer Learning, Journal of Labor Economics, )25), 651-691.
Sunde, U. (2003). Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data, Journal of Applied Economics, 41(25), 3199-3208.
Waldman, M. (2013). Classic promotion tournaments versus market-based tournaments, International Journal of Industrial Organization, 31(3), 198-210.
Zabojnik, J., & Bernhardt, D. (2001). Corporate tournaments, human capital acquisition, and the firm size-wage relation. Review of Economic Studies, 68(3), 693–716.
Zhang, Y.) 2007(. Employer Learning Under Asymmetric Information: The Role of Job Mobility, Mimeo, Indiana University Purdue University (IUPUI), 1-42.
