The Implicit Incentive Effects of Promotion Opportunities on Effort Provision
AbstractThis study attempts to find a relationship between the implicit incentives provided by promotion opportunities and employee performance. It focuses on two different settings in which these incentives are present, namely situations in which the tasks to be performed after the promotion are similar as compared to the current job’s tasks, as well as situations in which the tasks differ after the promotion. Both scenarios are analysed through two-step generalized method of moment tests using panel data from a Swiss retail bank between 2006 and 2012. From the analysis, two conclusions can be drawn. First, in situations in which the tasks to be performed after promotion are similar, the incentives provided by the promotion opportunity increase employees’ effort provision. Second, in situations in which the tasks to be performed after promotion are different, there is no significant effect on employees’ effort provision. In general, it appears that a distinction between the two settings should be made to enhance understanding of the promotion incentive and increase its effective use in practice. Future research can further investigate this relationship, for example by focusing on the effect of the incentive on changes in behavior that may not directly be related to employee performance or by further disaggregating the promotion incentive construct.
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