Incentive pay configurations: the influence of national culture
| Published date | 06 August 2018 |
| Pages | 187-202 |
| DOI | https://doi.org/10.1108/EBHRM-12-2017-0059 |
| Date | 06 August 2018 |
| Author | Nicholas R. Prince,J. Bruce Prince,Rüediger Kabst |
| Subject Matter | HR & organizational behaviour,Global HRM |
Incentive pay configurations: the
influence of national culture
Nicholas R. Prince
Department of Management and Marketing,
University of Wyoming, Laramie, Wyoming, USA
J. Bruce Prince
Department of Management,
Kansas State University, Manhattan, Kansas, USA, and
Rüediger Kabst
Faculty of Business Administration and Economics,
Paderborn University, Paderborn, Germany
Abstract
Purpose –The purpose of this paper is to investigate the influence of national culture on the adoption of four
different incentive pay bundles (incentive maximizer, contingent rewarder, profit rewarder, and incentive
minimizer) using GLOBE national culture dimensions in 14 countries. It uses incentive pay bundles derived
by Prince et al. (2016).
Design/methodology/approach –The study adopted multile vel random-intercept logistic modeling
using firm incentive p ractice usage from the CRANET database and country cul ture scores from the
GLOBE study.
Findings –Evidence suggests that in-group collectivism is associated with increased use of the incentive
maximizer approach, in which firms use a combination of high levels of individual, team, and profit sharing
incentives, and decreased use of the incentive minimizer approach (where firms minimally employ incentives)
and the individual and team bonus focused contingent rewarder configuration. Higher uncertainty avoidance
is linked to increased use of the profit rewarder approach (where only profit sharing is emphasized) and
decreased use of the contingent rewarder approach. Performance-orientation cultures appear to supportusing
the incentive maximizer and avoiding the incentive minimizer bundles.
Originality/value –This study investigates incentive practice bundles that firms use verses separate
analysis of practices and use the GLOBE culture metrics. It utilizes multilevel modeling, which has been
lacking in past studies of culture and incentives.
Keywords Compensation, International human resource management, National culture,
Human resource configurations, Incentive pay
Paper type Research paper
1. Introduction
The adoption and diffusion of organizational practices has long been viewed through an
institutional theory lens, in which the central argument is that organizations in the same
institutional environment conform to institutional pressures (Dimaggio and Powell, 1983;
Scott, 2008; Kostova and Roth, 2002). National culture, the shared values, motives, and
beliefs that people from a common geographic region share, is an institutional pressure that
evolves from the cultural-cognitive institutional pillar (Scott, 2008) and influences adoption
of organizational practice (Hofstede, 1980; House et al., 2004). This is especially true in
regards to the human resource (HR) practices that organizations implement, as national
culture is one of the core organizing principles that employees use to shape their
expectations of work (Newman and Nollen, 1996). From the national culture literature,
“management practices should fit the local culture”(Hofstede, 1993). The underlying logic of
this statement is that if cultural-based expectations are too much at odds with HR practices
implemented, then expected outcomes will not be achieved. The general finding is that
national culture will influence organizations’use of HR practices (Newman and Nollen, 1996;
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 6 No. 2, 2018
pp. 187-202
© Emerald PublishingLimited
2049-3983
DOI 10.1108/EBHRM-12-2017-0059
Received 9 December 2017
Revised 2 February 2018
Accepted 9 February 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2049-3983.htm
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Incentive pay
configurations
Schuler and Rogovsky, 1998; Brewster and Mayrhofer, 2012; Tosi and Greckhamer, 2004;
Farndale and Sanders, 2016).
This is consistent with broader views of the institutional environment’sinfluenceon
HR practice adoption and effectiveness. Rizov and Croucher’s (2009) research used the
varieties of capitalism lens and found that calculative practices (which focus on individual
incentive pay schemes) are less successful in coordinated market economies (CMEs) than
liberal market economies. In one country (Denmark), the use of calculative practices
had a negative relationship to organizational performance. These results highlight the
importance of viewing pay practices broader than the often noted individual incentive
approach. They found that group-based practices (which included profit sharing and
share schemes), which are different than the calculative approach, had more support in
CMEs. The Gooderham et al. (2015) research on individual incentive pay practices
across 26 countries found that both culture and labor regulation (laws supporting
employment security and collective bargaining) influenced the adoption of incentive
practices. Gooderham et al. (2015) found that both culture and labor regulation
(laws supporting employment security and collective bargaining) influenced the adoption
of incentive practices.
The configurational approach challenges researchers to move beyond testing one HR
practice as a dependent variable separate from other related dependent variables to focus on
multiple combinations (or bundles) of practices that provide synergistic effects beyond the
additive effects of individual practices (Delery and Doty, 1996). The configurational
approach has often focused on “ideal types”where multiple practice combinations conform
to a common overall organizing principle this assumes that greater conformity to an ideal
type provides synergies leading to higher performance, yet not all research supports this
assertion (i.e. Verburg et al., 2007).
We find merit in focusing on empirical HRM practices-in-use bundles. Organizations
use different combinations of practices for different reasons, and these choices may or
may not conform to some ideal type logic. As noted by Jiang et al. (2012), “Strategic human
resource management (HRM) researchers argue for a focus on the bundles of human
resource (HR) practices in place, rather than individual practices, as a primary unit of
analysis when examining the impact of HR systems on individual and organizational
performance”(italics added, p. 73). Studies of HR practices-in-use configurations (such as
high performance work systems) have often been studied as a unidimensional construct
that include a configuration of innovative HR practices and have focused primarily on
how this configuration influences performance, productivity, and turnover (Huselid, 1995;
Jiang et al., 2012). A study within this stream of HR research found that the institutional
context (i.e. economic growth) an organization is embedded in will influence it to adopt an
innovative HR configuration (Lawler et al., 2011). Similarly, organizational context, such
as size, industry, etc., has been found to influence the configuration an organization will
implement (Toh et al., 2008). Recently, a study by Prince et al. (2016) identified a variety of
incentive pay bundles and found significant country differences in incentive configuration
adoption. These studies have highlighted two key points: organizations employ different
bundles of HR practice, and that the institutional environment will influence HR bundle
adoption. This study seeks to extend this prior work by investigating one aspect of the
institutional environment, national culture.
2. National culture and incentive pay bundle adoption
2.1 Incentive pay practices
Incentivepay practices are used to attract, motivate,and retain employees (Nyberget al., 2013)
and are part of total compensation. Incentive pay practices can payout rewards for
performance at the individual, group, or organizational levels (Schuler and MacMillan,1984).
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