National culture moderators of pay for individual performance and the financial performance of multinational enterprises

We examined the effectiveness of pay for individual performance (PFIP) in companies operating in multiple cultures. With the use of data from 308 multinational enterprises (MNEs) collected by IBM's WorkTrends™ project, we tested hypotheses regarding the moderating influence of the nine dimensio...

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Bibliographic Details
Published in:Applied psychology Vol. 72; no. 2; pp. 477 - 505
Main Authors: Posthuma, Richard A., Campion, Emily D., Campion, Michael A., Zhang, Haiyan
Format: Journal Article
Language:English
Published: Oxford Blackwell Publishing Ltd 01.04.2023
Subjects:
Collectivism
contingency theory
country culture
Cultural change
cultural congruence
Cultural factors
Culture
Data
Employees
Financial performance
firm financial performance
Future
Moderators
Multinational corporations
Organizational effectiveness
pay for individual performance climate
Uncertainty
ISSN:0269-994X, 1464-0597
Online Access:Get full text
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Summary:We examined the effectiveness of pay for individual performance (PFIP) in companies operating in multiple cultures. With the use of data from 308 multinational enterprises (MNEs) collected by IBM's WorkTrends™ project, we tested hypotheses regarding the moderating influence of the nine dimensions of the GLOBE country culture model on the relationship between PFIP and changes in financial performance over time. Multiple employees per firm (mean N = 24.7 employees) reported the extent there was a PFIP climate (PFIPc) in their firm. We matched these data at the firm level to changes in net income per employee over 4 years from the Wharton Research Data Service (WRDS). Consistent with predictions developed from contingency and cross‐cultural theories, after including relevant controls, we found the positive relationship between PFIPc and subsequent MNE performance is greater in cultures higher in future orientation, institutional collectivism and uncertainty avoidance and also lower in in‐group collectivism, power distance and humane orientation.
Bibliography:Funding information
University of Texas at El Paso
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ISSN:0269-994X
1464-0597
DOI:10.1111/apps.12384