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http://dx.doi.org/10.5762/KAIS.2017.18.11.409

The Effects of the Tournament Inflow and Outflow on the Relationship between Pay Dispersion and Organizational Performance  

Park, Ji Sung (College of Business, Chungnam National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.18, no.11, 2017 , pp. 409-415 More about this Journal
Abstract
This study examines the effect of pay dispersion on labor productivity by focusing on the inflow of newcomers into the tournament and the outflow of stayers from the tournament. According to tournament theory, the expansion of pay dispersion within the organization contributes to enhanced organizational performance by attracting high performers externally and by removing low performers internally within the organization. However, previous studies regarding tournament theory have overlooked the participant aspects. Therefore, this study explores how external hiring and involuntary turnover influence the effect of pay dispersion on labor productivity. This paper hypothesizes that pay dispersion will have a positive effect on labor productivity. Moreover, this paper predicts that the inflow of new competitors will strengthen the positive effects of pay dispersion on labor productivity, whereas the outflow of incumbents will weaken this relationship. Empirical results showed that pay dispersion increased labor productivity and the inflow of newcomers strengthened this positive relationship. However, contrary to our prediction, the outflow of incumbents weakened the positive effect between pay dispersion and labor productivity. These theoretical arguments and empirical findings highlight the proper conditions should be equipped to practically achieve the positive effect of pay dispersion on labor productivity.
Keywords
External Hiring; Labor Productivity; Low Performer Layoff; Pay Dispersion; Tournament Theory;
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