Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

Behavioural theory and the family business

Fifty years have passed since Cyert and March’s 1963 A Behavioral Theory of the Firm. During this time, BTOF has been adopted across different research domains to investigate how organizations set goals, how they determine aspirations and how they finally react to performance aspiration discrepancies. Cyert and March’s framework has also recently emerged as one of the dominant paradigms to understand the ways in which family business organizations make decisions. In this chapter, I review the theoretical development and empirical results of BTOF and its application in the family business field of study in order to identify theoretical and empirical gaps and propose suggestions for future research. The conclusions suggest that BTOF is both a theoretically and empirically valid perspective in family business research, particularly when combined with other theoretical frameworks. The principal recommendation is to apply behavioral theory to enhance scholarly understanding of  how family organisations define their aspiration levels and respond to organizational problems. 

Entrepreneurial bricolage : towards systematic empirical testing

The behavioral theory of “entrepreneurial bricolage” attempts to understand what entrepreneurs do when faced with resource constraints. Most research about bricolage, defined as “making do by applying combinations of the resources at hand to new problems and opportunities” (Baker & Nelson 2005: 333), has been qualitative and inductive (Garud & Karnoe, 2003). Although this has created a small body of rich descriptions and interesting insights, little deductive theory has been developed and the relationship between bricolage and firm performance has not been systematically tested. In particular, prior research has suggested bricolage can have both beneficial and harmful effects. Ciborra’s (1996) study of Olivetti suggested that bricolage helped Olivetti to adapt, but simultaneously constrained firm effectiveness. Baker & Nelson (2005) suggested that bricolage may be harmful at very high levels, but more helpful if used judiciously. Other research suggests that firm innovativeness may play an important role in shaping the outcomes of bricolage (Anderson 2008). In this paper, we theorize and provide preliminary test of the bricolage-performance relationship and how it is affected by firm innovativeness.

Betting on the underdog : bricolage as an engine of resource advantage

Resource-based theory posits that firms achieve high performance by controlling resources that are rare, valuable and costly for others to duplicate or work around. Yet scholars have been less successful understanding processes and behaviours by which firms develop such resources. We draw on the behavioral theory of bricolage from the entrepreneurship literature to suggest one such mechanism by which firms may develop such resource-based advantages. The core of our argument is that idiosyncratic bundling processes synonymous with bricolage behavior may create advantageous resource positions by (i) allowing resource constrained firms to allocate more of their limited resources to activities that they view as more strategically important, and (ii) increasing the difficulties other firms face in trying to imitate these advantages. Based on this reasoning we develop several hypotheses which we test in the context of several samples from a large, longitudinal, Australian study of new firm development. The results support our arguments that bricolage will improve a firms’ overall resource positions while generating more areas of strong resource advantage and fewer areas of strong resource disadvantage. We find little support, however, for our arguments that bricolage will make a firms’ key resource advantages more difficult for other firms to imitate. We find some support for our argument that the role of bricolage in creating resource advantages will be enhanced by the quality of the opportunity with which a firm is engaged.

Entrepreneurial bricolage and firm performance : moderating effects of firm change and innovativeness

The behavioral theory of “entrepreneurial bricolage” attempts to understand what entrepreneurs do when faced with resource constraints. Prior research suggests that bricolage behaviors enable firms to “make do” through recombining existing resources and may assist in the development of firms that are better able to manage market uncertainties, survive and perhaps even flourish despite resource constraints. Using a new survey measure we further theorize and test the moderating effects of firm strategic change and innovativeness on bricolage and firm performance. Our findings suggest that changes in core elements of the business and degree of innovation reduce the positive effects of bricolage in young firm performance.

Bricolage and firm performance: The moderating role of the environment

The behavioral theory of “entrepreneurial bricolage” attempts to understand what entrepreneurs do when faced with challenges and constraints. Most research about bricolage, defined as “making do by applying combinations of the resources at hand to new problems and opportunities” (Baker & Nelson 2005: 333), has been qualitative and inductive (Garud & Karnoe, 2003). Although this has created a small body of rich descriptions and interesting insights, little deductive theory has been developed and the relationship between bricolage and firm performance has not been systematically tested. In particular, prior research has suggested bricolage can have both beneficial and harmful effects. Ciborra’s (1996) study of Olivetti suggested that bricolage helped Olivetti to adapt, but simultaneously constrained firm effectiveness. Baker & Nelson (2005) suggested that bricolage may be harmful at very high levels, but more helpful if used judiciously. Other research suggests that firm environments may play an important role in shaping the outcomes of bricolage (Fisher, 2012). In this paper, we theorize and provide preliminary test of the bricolage-performance relationship and how it is affected by environmental dynamism.

Environmental dynamism as a moderator of the relationship between bricolage and firm performance

Many firms initially face significant resource constraints during attempts to develop and grow (Shepherd et al., 2000). One promising theory that explicitly links to ways entrepreneurial firms respond to resource constraints is bricolage (Lévi-Strauss, 1966). Bricolage is defined as “making do by applying combinations of the resources at hand to new problems and opportunities” (Baker & Nelson, 2005, p. 333). Bricolage aligns with notions of resourcefulness: using what’s on hand, through making do, and recombining resources for new or novel purposes. Through a bias for action and a refusal to enact limitations on the resources that are available to create solutions, bricoleurs can tackle unexpected complex challenges, take advantage of opportunities, and go where most other firms won’t, in their attempts at firm development. Bricolage studies have previously not empirically examined the impact of bricolage on firm performance. Our work contributes to the emerging behavioral theory of bricolage by offering the first empirical test evaluating the impact of bricolage on early stage firm performance (i.e. venture emergence in nascent firms and sales in young firms). Using new product development (NPD) theories of speed of development, co-creation and innovativeness, we theorise that bricolage has a positive effect on early stage firm performance. We then introduce environmental dynamism as a moderator which influences this relationship.

Resolving questions about bias in real and hypothetical referenda

Despite 10 years of research on behavior in hypothetical referenda, conflict remains in the literature on whether or not the mechanism generates biased responses compared to real referenda, and the nature and source of any such bias. Almost all previous inquiry in respect of this issue has concentrated on bias at the aggregate level. This paper reports a series of three experiments which focuses on bias at the individual level and how this can translate to bias at the aggregate level. The authors argue that only an individual approach to hypothetical bias is consistent with the concept of incentive compatibility. The results of these experiments reflect these previous conflicting findings but go on to show that individual hypothetical bias is a robust result driven by the differing influence of pure self-interest and other-regarding preferences in real and hypothetical situations, rather than by a single behavioral theory such as free riding. In a hypothetical situation these preferences cause yea-saying and non-demand revealing voting. This suggests that investigation of individual respondents in other hypothetical one-shot binary choices may also provide us with insights into aggregate behavior in these situations.

Estilos de liderazgo y su relación con los niveles de optimismo de los colaboradores, en entornos culturales de países suramericanos

Los estudios del liderazgo dentro de un contexto empresarial se han desarrollado para alcanzar la perdurabilidad empresarial, generar bienestar, lograr el éxito esperado, valorar el capital humano, los talentos y los recursos existentes, etc. Sin embargo, aún existen muchos aspectos que se deben analizar. Uno de ellos es entender los conceptos del optimismo, del tipo de liderazgo y las diferencias culturales de diversos países. Por otro lado, no hay evidencia precisa de la repercusión que tiene el tipo de liderazgo en los seguidores según la cultura presente, que permita comprender las relaciones existentes entre estas variables. Este texto que se presenta se basa en una revisión conceptual de los diferentes tipos de liderazgo; transaccional y transformacional, de la psicología positiva, del capital psicológico y del optimismo. Así mismo, presenta los diferentes estudios que se han realizado acerca de la relación que existe entre el liderazgo y el optimismo generado en los empleados para lograr mayores y mejores resultados, y una relación del liderazgo en diferentes culturas con poca distancia cultural frente a Colombia.

Avaliação da estratégia saúde da família na capital potiguar

This research aimed to evaluate the Family Health Strategy (FHS) in Natal, Rio Grande do Norte, through its managers, professionals and users, having as its support the Theory of Belief and the Cognitive-Behavioral Theory. This is a multimethod research and is divided into three sub-studies. In the first study, nine managers answered to a semi-structured interview, to verify the knowledge and beliefs on SUS; the quantitative data were analyzed with descriptive statistics with the aid of SPSS software and the qualitative data were submitted to lexical analysis with support of ALCESTE software. In the second study, we have a descriptive correlational research in which the antecedent variables are related to working conditions in the family health units (FHUs) and to the professionals‟ profile; the corresponding variables refer to the evaluations of the FHS; a stratified probabilistic sample with 475 professionals, who answered to two scales, both consisting of three factors: Physical infrastructure, Material resources, and Treatment effectiveness, and data were analyzed using descriptive, bivariate and multivariate statistics, with the aid of SPSS. The third study is a descriptive correlational research in which the antecedent variables refer to the treatment in the FHUs and to the users‟ profile, and the corresponding variables refer to the evaluations of the FHS, with a stratified non-probabilistic sample with 390 users, who contributed to the construction of a new scale with a factor, effectiveness in treatment, analyzed through descriptive, bivariate and multivariate statistics, with the aid of SPSS. The results showed problems which start from management, under the shape of admission due to political indication and lack of knowledge on SUS and the FHS; they pass through the low tenure of professionals and insufficient professional; and they end up spreading all over the analyzed items: infrastructure of FHUs, material resources, professionals‟ training, accessibility and referral system. One concludes that, despite following an ideal model, the FHS is in need of changes with regard to the barriers to its operational reality

A gestão de resíduos sólidos em contextos intraorganizacionais: um estudo a partir da UFPA

Esta dissertação centra esforços em responder à seguinte pergunta: Como se deu o processo de implantação do Programa Coleta Seletiva Solidária na Universidade Federal do Pará? O referido programa foi instituído pelo Decreto Federal nº 5.940 do dia 25 de outubro de 2006 e visa à destinação do material reciclável produzido nos órgãos públicos federais da administração direta e indireta às associações e cooperativas de catadores. Esta ação, apesar de restrições quanto a sua destinação, vem contribuir com a diminuição da pobreza e o impacto ambiental em áreas naturais. O objetivo desta pesquisa é conhecer e analisar o processo de implantação do Programa Coleta Seletiva Solidária na UFPA. Teve o apoio das bases teóricas do Neoinstitucionalismo em Hall e Taylor e comparações das abordagens teóricas de Olson e Ostrom sobre a Teoria Comportamental da Ação Coletiva na produção de um Bem Público. A metodologia utilizada foi de caráter descritivo e qualitativo. A teoria conduziu ao trabalho de campo para as técnicas de observação, entrevistas semiestruturadas e pesquisa documental. Foram realizadas 25 entrevistas com técnicos da Prefeitura da Cidade Universitária da UFPA, diretores e coordenadores de Unidades Acadêmicas além de funcionários dos serviços gerais. Como resultado, foi constatada a necessidade de um trabalho de interação dentro das próprias Unidades Acadêmica, destas entre si e, paralelamente, com a Administração Superior. Em Ostrom, encontrou-se o apoio ao direcionamento teórico em razão de sua concepção de uso comum e as decisões coletivas de cooperação baseadas na reciprocidade e confiança entre as pessoas. Ela acrescenta elementos à Teoria da Ação Coletiva de Olson e mostra que trabalhos em busca do bem comum são possíveis desde que haja regras nas quais todos estão sujeitos aos benefícios das externalidades advindas. Com as abordagens institucionais e de ação coletiva apresentadas, este estudo pretende contribuir com a aplicação da Gestão Ambiental na Administração Pública. Os resultados alcançados podem levar à prática da Coleta Seletiva Solidária da UFPA, incentivando os gestores do interior do Estado a engajarem-se ao programa.

FAMILY MEDICINE RESIDENT SURVEY ON HEALTH PROMOTION (PERSONAL EXPECTATIONS, BEHAVIORS, PERCEIVED SELF-EFFICACY, COGNITIVE ASSESSMENT, OUTCOME EXPECTANCY)

This study was designed to test the theoretical predictors of personal efficacy expectations among family medicine resident physicians for helping their patients change thirteen high risk health behaviors. A survey questionnaire was sent to 781 family medicine residents in the six state south central region. The response rate was 60 percent. The hypothesized relationship between lower levels of difficulty and higher personal efficacy expectations was supported by the data. Effort was a significant predictor of perceived self efficacy for health behaviors considered less difficult to change. Situational support did not prove to be a significant predictor for many of the health behaviors. Rate and pattern of success were consistent and significant predictors of perceived self efficacy for helping patients change all thirteen of the health behaviors. Modeling of effective methods by faculty was a significant predictor of efficacy expectations for several but not all of the behaviors. Personal modeling was a significant predictor of perceived efficacy for helping patients change behaviors related to alcohol misuse and exercise. The respondents personally modeled positive health behaviors more consistently than their older colleagues or the general population.^ The results of this study lend substantially to the usefulness of the cognitive-behavioral theory of perceived self efficacy and provide a mechanism for assessing the predictors of personal efficacy expectations of family medicine resident physicians. The findings are expected to have direct implications for faculty to institute systematic programs of interventions designed to increase residents' perceptions of efficacy in facilitating more positive health behaviors among their patients. ^

Participative Budgeting and Participant Motivation: A Review of the Literature

In their discussion - Participative Budgeting and Participant Motivation: A Review of the Literature - by Frederick J. Demicco, Assistant Professor, School of Hotel, Restaurant and Institutional Management, The Pennsylvania State University and Steven J. Dempsey, Fulton F. Galer, Martin Baker, Graduate Assistants, College of Business at Virginia Polytechnic Institute and State University, the authors initially observe: “In recent years behavioral literature has stressed the importance of participation In goal-setting by those most directly affected by those goals. The common postulate is that greater participation by employees in the various management functions, especially the planning function, will lead to improved motivation, performance, coordination, and functional behavior. The authors analyze this postulate as it relates to the budgeting process and discuss whether or not participative budgeting has a significant positive impact on the motivations of budget participants.” In defining the concept of budgeting, the authors offer: “Budgeting is usually viewed as encompassing the preparation and adoption of a detailed financial operating plan…” In furthering that statement they also furnish that budgeting’s focus is to influence, in a positive way, how managers plan and coordinate the activities of a property in a way that will enhance their own performance. In essence, framing an organization within its described boundaries, and realizing its established goals. The authors will have you know, to control budget is to control operations. What kind of parallels can be drawn between the technical methods and procedures of budgeting, and managerial behavior? “In an effort to answer this question, Ronen and Livingstone have suggested that a fourth objective of budgeting exists, that of motivation,” say the authors with attribution. “The managerial function of motivation is manipulative in nature.” Demicco, Dempsey, Galer, and Baker attempt to quantify motivation as a psychological premise using the expectancy theory, which encompasses empirical support, intuitive appeal, and ease of application to the budgetary process. They also present you with House's Path-Goal model; essentially a mathematics type formula designed to gauge motivation. You really need to see this. The views of Argyris are also explored in particular detail. Although, the Argyris study was primarily aimed at manufacturing firms, and the effects on line-supervisors of the manufacturing budgets which were used to control and evaluate their performance, its application is relevant to the hospitality industry. As the title suggests, other notables in the field of behavioral motivation theory, and participation are also referenced. “Behavioral theory has been moving away from models of purported general applicability toward contingency models that are suited for particular situations,” say the authors in closing. “It is conceivable that some time in the future, contingency models will make possible the tailoring of budget strategies to individual budget holder personalities.”

Faktorer som påverkar sjuksköterskors följsamhet till riktlinjer för handhygien utifrån en beteendeteori En litteraturöversikt

Vårdrelaterade infektioner är ett globalt problem och god handhygien är det främsta verktyget i kampen mot vårdrelaterade infektioner. Följsamhet till handhygien är globalt sett låg. Sjuksköterskans händer är den främsta källan för att sprida smitta därför är sjuksköterskans beteende vad gäller handhygien viktig. Sjuksköterskans avsikt att utföra handhygien kan förklaras av den inre dimensionen som enligt Theory of planned behaviour är attityder, subjektiva normer och upplevd beteendekontroll. Syfte: Litteraturöversiktens syfte var att beskriva vilka attityder, subjektiva normer och upplevda beteendekontroller som påverkar sjuksköterskans följsamhet av riktlinjer för handhygien. Metod: Denna studie har genomförts som en litteraturöversikt och baserades på fjorton artiklar av kvantitativ- och kvalitativ metod som har sökts ur databaserna PubMed, CINAHL och Web of Science. Resultat: Studiens resultat visade att det utifrån perspektivet av Theory of planned behaviour finns attityder, subjektiva normer och upplevda beteendekontroller som påverkar sjuksköterskans följsamhet till riktlinjer för handhygien. Sjuksköterskan upplevde att personligt skydd var en framträdande attityd som motiverade till handhygien. Under subjektiv norm så framträdde patienten, kollegor och förebilder som motiverande faktorer till att utföra handhygien och att känslan av att det är enkelt att utföra handhygien var den mest framträdande faktorn under upplevd beteendekontroll. Sammanfattning: Följsamhet till riktlinjer för handhygien är låg trots nationella insatser och kampanjer för att öka följsamheten. Resultatet visade att sjuksköterskans följsamhet till riktlinjer för handhygien främst påverkades av personligt skydd, patienten, kollegor, förebilder och känslan av att det är enkelt att utföra handhygien. Litteraturöversiktens resultat kan användas för att öka kunskapen om området och utveckla nya strategier för att öka sjuksköterskans följsamhet till riktlinjer för handhygien.

la influencia de la felicidad en las decisiones de inversión de activos de largo plazo para una muestra de siete gerentes financieros en la ciudad de Bogotá en el año 2016.

El presente artículo contribuye con la investigación de las Finanzas Corporativas del Comportamiento, rama de las finanzas corporativas que considera que el individuo que toma decisiones financieras no es completamente racional y que por hecho existen sesgos psicológicos que influyen en sus decisiones. Este documento se enfoca, desde el punto de vista conceptual y también mediante el análisis de un estudio de campo, en la influencia de la felicidad en las decisiones de inversión en activos de largo plazo para un grupo de siete gerentes ubicados en la ciudad de Bogotá en el año 2016. En el documento se abarca el concepto general de las finanzas corporativas del comportamiento, se define la felicidad y se presentan sub-variables determinantes para la felicidad del individuo como lo son: salud, balance vida/trabajo, educación y habilidades, conexiones sociales y medio ambiente. Finalmente se presenta cómo éstas afectan a los gerentes financieros en sus decisiones de acuerdo a la investigación realizada.