Employees’ motivation and high performance workplace practices

Annalisa Cristini

University of Bergamo October 2011

This is a very revised version of a paper I wrote during my sabbatical year at the Department of Economics and Nuffield College, Oxford. I wish to thank Steve Nickell for extensive discussions and many important insights. I also thank Duncan Gallie, Ken Mayhew, Ying Zhou, the participants to the Oxford Economics Department seminar (May 2007) and J¨ orn-Steffen Pischke for comments on a previous version of the paper. The usual caveats apply. Research grants from the University of Bergamo are acknowledged. Contact address: Department of Economics, University of Bergamo, Via dei Caniana 2, 24127 Bergamo, Italy. Email: annalisa.cristini@unibg.it. Tel.: +39 035 2052 549; Fax: +39 035 2052549.

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Abstract Existing evidence shows that employees’ motivation usually improves in presence of innovative workplace practices. This paper examines whether this result is ascribable to a higher intrinsic motivation, which grants a higher effort for a given remuneration and job quality, or to a higher extrinsic motivation. A simple model of organizational commitment is suggested to help identify the channels through which innovative practices affect motivation. The model is estimated on a nationally representative sample of Italian employees. Results show that practices providing substantial empowerment are powerful intrinsic motivators: for given pay and working conditions, they strengthen employees’ attachment to the firm and identification with its values. In contrast, innovative practices bear only marginally on the extrinsic motivation; moreover, pecuniary rewards are negative reinforcers when contingent on performance; finally, the relative wage can affect employees’ attachment to the firm but not their sense of belonging.

JEL Classifications: J28 J33 J53 M54

Keywords: High Performance Workplace Practices, Motivation, Commitment, Wages, Working conditions.

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Introduction

More than forty years ago Leibenstein (1966, p.413) argued that “for a variety of reasons people and organizations normally work neither as hard nor as effectively as they could” and regarded motivation to be a major determinant of X-efficiency. Since Leibenstein’s work, the debate about what motivates real people in real organizations (Simon, 1991) unfolded along the idea that people’s management should hinge on commitment rather than control (Walton, 1985) and contributed to the emergence of innovative work systems and management practices1 aimed at enhancing employees’ commitment through substantial involvement and empowerment (Osterman, 1994 and 2000, European Commission, 2002). This general view attracted a considerable attention and is now supported by a pretty sound evidence2 ; by contrast, the more specific question of whether the new management practices bear on employees’ extrinsic or the intrinsic motivation has not been investigated; yet, it is immediately relevant to the firm costs: The case in which employees involved in the new system exert a higher effort only to the extent that they share, in the form of higher monetary rewards, the productivity gains engendered through their involvement3 , is quite different from the case in which involved employees are more willing to work simply for the work’s sake. In the former case innovative practices can be regarded as ultimately extrinsic motivators; in the latter one
Innovative work systems are usually characterized by so-called High Performance Workplace Practices (HPWP), which typically include: self managed teams, job rotation, formal arrangements aimed to openly discuss production problems, suggestions schemes, performance related pay and information sharing; in some cases hiring procedures and training are also considered. See for example Pfeffer (2007). 2 Freeman and Kleiner (2000) show that employees participating in employee involvement programs (like total quality management, opinion surveys, information sharing, committee on productivity, worker involvement in the design of employee involvement programs, worker involvement in work processes, self managed teams) report higher trust and loyalty to the firm and higher work satisfaction than non-involved employees. Godard (2001), using a sample of Canadian workers, finds that job satisfaction, commitment and motivation are all positively related to an indicator of new workplace practices although he also finds that work intensification can in same cases offsets the benefits. In another Canadian matched employer-employee dataset Mohr and Zoghi (2008) find that innovative practices (suggestion schemes, task teamworking, job rotation, quality circles, information sharing, self directed work-group and class training) are all positively related to job satisfaction. For Europe, Bauer (2003) finds that the degree of job autonomy (regarding tasks order, methods of work, job speed and quality) and the extent of information sharing (horizontal and vertical communication) drive the positive relation between HPWP and job satisfaction. However, for Britain, using WERS 2004, Guest and Conway (2007) fail to find any significant association between employees’ organizational commitment and a bundle of innovative human resource management practices. Guest (1999) provides a discussion of how employees fare in presence of innovative practices. 3 The positive role of innovative practices on firm productivity has, on the whole, a sound empirical support; see for example: Ichniowski, Shaw and Prennushi (1997) and Black and Lynch (2004) for the USA, Wood and De Menezes (1998), Bryson et al (2005) and Patterson et al. (1997) for the UK, Bauer (2003) and Zwick (2004) for Germany, Greenan (1996) and Caroli and Van Reenen (2001) for France, Kato and Morishima (2002) for Japan; Cristini, Gaj and Leoni (2003) for Italy. Less clear-cut results are found on the role of innovative practices on the wage: these are discussed below in the text.
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they are genuinely intrinsic motivators (Frey, 1987; Frey and Jegen, 2011; Benabou and Tirole, 2003). There are at least two further reasons why this distinction is likely to be relevant. The first one rests on the so called ’hidden costs of rewards’ (Lepper and Greene, 1978; Deci and Ryan, 1985): external interventions, particularly in the form of contingent pecuniary rewards may be negative reinforcers, thus can partially or totally crowd out one’s intrinsic motivation. This result, long known in cognitive psychology, has been recently derived by Benabou and Tirole (2003) within an extended principal agent models where asymmetric information between the principal and the agent is the conditio sine qua non for this effect to arise.4 . The second reason is that, even in absence of crowding out effects, extrinsic and intrinsic motivations normally relate to different work attitudes and behaviors: according to a well known psychological view initiated by Etzioni (1971) the remunerative power of the organization, not only may undermine intrinsic motivation, but can also buy only a ’calculative’ type of commitment. This paper suggests an analytical framework to distinguish between the sources of work motivation induced by innovative workplace practices and derive the theoretical conditions for the optimal amount of organizational commitment to rise in presence of such practices. A corresponding empirical model is estimated using a nationally representative sample of 3605 Italian employees working in the private sector. Results show that the theoretical conditions are easily satisfied for some but not all innovative practices and that these practices are essentially intrinsic motivators. The relative wage is found to have a narrower scope than the best innovative practices as it helps retaining workers but don’t get to their sense of belonging; furthermore, the evidence shows that pecuniary rewards, if contingent on performance, can even reduce the firm attachment by backfiring on employees’ intrinsic motivation. These crowding out effects are found to be related to the workers’ educational attainments and are interpreted along the theoretical notion of sorting condition (Benabou and Tirole, 2003). The rest of the paper is organized as follows: the next section introduces the theoretical set up; section 3 describes the data, section 4 illustrates the empirical model and the estimation strategy, section 5 discusses the econometric results and the last section concludes.
Various work situations where external interventions are likely to undermine intrinsic motivation are discussed by Frey (1997) and a survey of the evidence is reviewed in Frey and Jegen (2001); crowding out effects within labour relationships are supported by laboratory and field experiments (Gneezy and Rustichini, 2000; Fehr and Schmidt, 2000) and by some econometric evidence based on survey and case studies (Jordan, 1986; Barkema, 1995; Minkler 2004).
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2003). Frey. it will be specified in in the empirical section. in the marginal benefit. 1997). contingent rewards. BΩΩ < 0 and CΩ > 0. increase workers’ interest in their their tasks. if part of the innovative system. the productivity gains engendered by adopting innovative practices will be distributed to employees’ salaries in proportion to the unions’ bargaining power. We argue that innovative practices can affect the determinants of the marginal benefit and the marginal cost. for given monetary incentives. strengthen personal interactions at work and involve employees in firms’ decisions (Frey (1997)). if taken to indicate a positive judgment on the employee’s ability on the part of the principal.2 The model Each employee chooses her amount of commitment Ω∗ in order to maximize the net benefit. relative to her wage. b3 are positive parameters and λ (0 < λ < 1) captures the importance that the employee attaches to her intrinsic motivation. In a similar vein. they are expected to enhance intrinsic motivation to the extent that they substantially empower employees (Benabou and Tirole (2003). Innovative practices might further affect the marginal benefit through the wage. In presence of wage bargaining. First of all. 1997) or as negative signals of the task attractiveness or of their own ability (Benabau and Tirole. the average wage could still rise in presence of productivity gains to the extent that the employer unilaterally decides to do so on the basis of fairness or other efficiency wage conThe reference wage is thought to be the peer group’s wage. undermine intrinsic motivation as long as employees perceive them as a means of control (Etzioni. Akerlof e Kranton (2005) show that the employee’s work effort rises. 1971. can change employees’ attitudes permanently. were bargaining not relevant. The marginal benefit is assumed to be positively related to the employee’s intrinsic motivation (µ) and relative wage5 (w) while the marginal cost declines with the quality of the working conditions (d). where the benefit and cost functions are respectively concave and convex in commitment: BΩ > 0. 6 5 4 . when employees’ identity aligns with the firm’s goals and values. enhance their firm identity (Akerlof e Kranton (2005))6 . the marginal functions can be expressed as follows: BΩ = [λµ + (1 − λ)w] − c1 Ω CΩ = −b3 d + c2 Ω (1) (2) where c1 . CΩΩ > 0 (Frey. By contrast. If the benefit and cost functions are quadratic in Ω and linear in the parameters. c2 . Benabou and Tirole (2003) use a generalized principal agent model and show that empowerment.

innovative practices might enhance human capital (Caroli and Van Reenen. Askenazi and Caroli (2006) using a representative sample of French workers find quality norms and job rotation to be associated with higher number of injuries and mental strain. Nickell. the ”suspicion that total quality management represents a new form of taylorism” is also raised by Adler et al. Turning to the marginal cost of commitment. Farris and Brenner (2001) and Brenner et al. 2001. Black. finds that the combination of union representation and best practices yields relatively higher wages although high performance practices are strongly associated with non-union workers’ wages. 9 According to Gallie and Green (2002) UK skilled workers and workers upskilling are characterized by mounting anxiety. find no significant impact of HPWP on either the average establishment wage or the individual wage. Handel and Gittelman (2004). on a sample of about 300 US establishments in the private sector. Godard (2007). enrich the job content.siderations (Akerlof. Bresnahan et al.. on the subsample of firms present since 1977 in the Education Quality of the Workforce National Employer Survey (EQW NES) US panel. (2004) combine the 1993 US Survey of Employer Provided Training with the 1993 Survey on Occupational Injuries and Illnesses and find that total quality management and the interaction of total quality management and teamwork raises cumulative trauma disorders.. on the subsample of all manufacturing firms in the EQW NES also find a positive association between wages and the practices of meetings and profit sharing. 1982. Table 7) the probability of experiencing a 20% or more employment reduction is positively associated with an intensive use of self managed teams and job rotation by non managerial workers although the results are attenuated in unionized establishments. that job autonomy. job rotation and autonomous work teams are related to greater occupational injuries and illnesses. finally. 1996). More recently. and Green (2004) associates work intensification to the new workplace. finds that core workers employed in firms that introduced HPWP four years before. 8 Askenazy (2001) uses a panel of 26 US sectors over four quinquennia from 1979 to 1991 and finds that total quality management. discretion and reduced supervision which ensue from empowerment and involvement. (2004. are highly appreciated by the workers and highly compensated as amenities (Clark. 2004 Helliwell and Huang. find a positive and significant relationship between practices and labour cost. a strand of the health literature finds that some innovative practices are associated with a deterioration of working conditions due to increasing risks of injuries and occupational illnesses8 . to higher rates of anxiety and work intensity and to a reduced job security. Other scholars have stressed. on the contrary. Moreover. 2005).7 . Cappelli and Neumark (2001). enjoy no significant wage gains. Osterman (2000). Because of these partly contrasting forces the link between innovative practices and the wage may be weak and indeed the existing evidence is overall inconclusive. 2002) bringing about skills upgrading and consequent wage increases. 7 5 . According to Black et al. Osterman (2000) finds that as new work systems may lead to thorough reorganizations and layoffs. the sign of the relation between working conditions and innovative practices is therefore ambiguous.9 . A priori. but only when practices are interacted with the union dummy. job security is also jeopardized. using Canadian and English data. innovative practices might give rise to amenities or disamenities and the wage could partly or totally compensate for them. Osterman (2006) finds a positive impact of a principal component indicator of HPWP on the level of the median wage of core non-manager employees. Lynch and Krivelyova (2004). This is also the conclusion of Handel and Levine (2004)’s survey. on a sample of 1062 US establishments from the 1995 Survey of Employer-Provided Training. (1997). Mohr and Zoghi (2008) use Canadian data and find that quality circles rise the desire to work less hours due to stress but do not find a direct relation between days of work lost and HPWP.

Optimal commitment rises with involvement if the following holds: λ ∂µ dw ∂d + (1 − λ) + b3 >0 ∂π dπ ∂π (6) where dw/dπ = ∂w/∂π + ∂w/∂d · ∂d/∂π . Apprendimento e Competenze” which translates as ”Organization. the employee’s personal characteristics). d|z ) Ω∗ = c−1 [λµ(π ) + (1 − λ)w + b3 d] (3) (4) (5) where z is a vector of exogenous variables (typically. Learning and Competencies”) designed by ISFOL (Institute for the Development of Workers’ Training. λ must rise if ∂µ/∂π > 0 and decline if ∂µ/∂π < 0. The empirical values of these three components are estimated in section 4 and innovative practices will be classified accordingly. The relative weight of the intrinsic motivation matters. f (·) and g (·) are monotonic functions. Table 11 in the appendix derives the values of λ for which the condition holds: as the effects of the practices on the wage and on working conditions decline and become negative. however. ∂µ/∂π < 0 and ∂d/∂π < 0.Taking stock of the above discussion.. The condition is determined by three components: the effect of innovative practices on the intrinsic motivation (λ · ∂µ/∂π ). on the relative wage ((1 − λ) · dw/dπ ) and on the working conditions (b3 · ∂d/∂π ). 3 The data The data used to estimate the model are taken from the survey OAC (”Organizzazione. when the three components have opposite signs. ∂µ/∂π > 0 and ∂d/∂π > 0 and never satisfied if dw/dπ ≤ 0. equation (5) is derived from equating the marginal cost and the marginal benefit of commitment. The above inequality is always satisfied if dw/dπ ≥ 0. a public think tank based in Rome) on the basis of Skills in Britain (Felstead et al. c = c1 + c2 > 0 captures the curvatures of the benefit and cost functions and summarizes preferences. we model the following system of linear equations: d = f (π |z ) w = g (π. 2002) and addressed in 2004 6 .

Organizational commitment is measured on the basis of a standard set of statements on which the employee is asked to agree or disagree using a Likert scale12 : (i) This organization really inspires the very best in me in the way of job performance. Strongly agree (6). 1979) and are the same used in by Gallie et al. captured by items (vi)-(vii). and then rescaling the indicators into 7 categories. Disagree (3). on the presence of contingent premia. Totally agree (7). on working conditions. 13 Gallie et al. In order to test for potential different effect of extrinsic and intrinsic motivation. on the average wage. The different skewness of 11 10 7 . 2007. and can be regarded as particularly strong expressions of commitment (while) the remaining (items) are rather weaker expressions of identification with the organization and its values. captured by items (i)-(v). and a dimension of firm attachment. The detailed information that the survey provides on employees’ involvement in innovative practices. The survey was carried out in collaboration with the Italian Statistical Institute and its statistical structure was based on the Italian Labour Force Survey. together with numerous individual and firm characteristics. (ii) I am proud to be working for this organization. p. after reversing the scales of statement (iv). implicit either in the acceptance of ’any job’ or in the refusal of a better outside job offer. net of errors and invalid strings.scm Because of problems related to eligibility details and low response rates required the conduct of some extra interviews. (1998. Strongly disagree (2). (v) I am willing to work harder than I have to in order to help this organization succeed.10 . (iii) I find that my values and the organization’s values are very similar. Tomassini. chapter 1).” See also Godard (2001) for an equivalent distinction.it/Banche Dati/Organizzazione apprendimento e competenze (Oac)/index. (vii) I would turn down another job with more pay in order to stay with this organization.to a nationally representative sample of 4000 Italian employees working in the private sector (ISFOL. 12 The statements are a subset of the most frequently used Mowday’s Organizational Commitment Questionnaire (Mowday et al. 3605 observations were finally made available11 . Both measures are computed by summing the relevant items. http://www. 2006). makes it a very useful dataset for this empirical analysis. I distinguish between two types or dimensions of commitment: a dimension reflecting sharing of values and firm identification. Employees were first contacted and then interviewed at home using CAPI.Indifferent (4). (vi) I would take almost any job to keep working for this organization. the validation procedure discarded any bias between the two parts of the survey (ISFOL (2007).isfol. For convenience I call the two components value and strong commitment and will be used as alternative measures of Ω. (1998) for Britain.238) comment that items (vi) and (vii) ”express a willingness to be flexible to the point of some personal sacrifice. on the content of their jobs. Fairly agree (5). The Likert scale is: Totally disagree (1). characterized by a relatively stronger sense of commitment revealed by the fact that the employee is ready to bear a ’cost’ to stay with the organization. (iv) I feel very little loyalty to this organization.13 .

As it is clear from the longstanding sociological debate on self managed teamworking. enjoys a significant degree of autonomy. ”Do you work in team?” (team). 2001). both using UK WERS. 16 Autonomous or self managed teamworking origins in the Swedish-inspired sociotechnical team which.16 . attendance and absence control. resp and group are all true. ”In the last 12 months have you made any suggestions to colleagues or heads aimed at improving efficiency in your work?” (suggest). if item (v) is included in the strong commitment definition rather in the value commitment one. these are: allocation of work. 2001) or similar surveys (Steijn. 1999) the minimum discretion that a team must enjoy in order to be classified as ’autonomous’ varies in the literature. the approach used in this paper also allows one to detect intermediate cases where only some of the autonomy dimensions may be present. Cullie et al. handling non-routine problems. improving work processes. then. 8 . writing up reports. ”Do you participate in periodic employer-employee meetings?” (meet). lean teams (team is true but none of task.Employees’ involvement in innovative practices is measured by a vector of dummy variables on the basis of employees’ answers to the following specific questions: ”Do you take part in quality circles?” (qc). we know whether the employee has received monetary premia on the basis of her performance. the difficulty of an exact definition reflects the eclectic implementation of this concept in the real workplace (Steijn. job rotation. 15 Either one of these three items must be true: a) The team members together propose the team leader to the management. show distributions far away from the normal and were not used. (1999) and Harley (2001).. With regard to contingent rewards. ”Has your company received any quality certification?” (quality). b) The team members together decide the team leader. covering breaks and schedules. c) The team members together decide about matters regarding new team members. quality of work. b) The team members together decide which other tasks to do. Batt (2004) studies a case where self managed teams are those that assume supervisory tasks including: setting daily assignments. 14 Either one of these two item must be true: a) The team members together decide how to do the work. and calling directly on subject matter experts as needed. ”Is your team autonomous in task-related issues?” (task)14 . it is important to retain a sufficient flexibility. task. the team is fully autonomous and the definition is very close to the one used by Cullie et al. for example. in contrast to the Japanese-inspired lean team. in designing an empirically viable definition. On the basis of these information. resp and group is true) is distinguished from various types of sociotechnological teams characterized according to the extent and types of autonomy. Results are qualitative similar but not as clear cut. scheduling of work. ”Is your team responsible for the output or service produced?” (resp). define autonomous teams as those in which ”members work with one another and have responsibility for specific product or service and jointly decide how work is to be done” or as those in which ”members work with one another and have responsibility for specific product or service and jointly decide how work is to be done and appoint their own team leaders”. In particular. however. coordination of work with other internal groups. (1999) and Harley (2001). although regarded as a crucial practice in the new work systems (Benders and Van Hootegem. ”Is your team autonomous in matters regarding the team members?” (group)15 . Alternative composite indicators based on the number of statements the respondent agrees with. Scholars using EPOC (Benders et al. when team. Specifically. two are the relevant questions: ”Have you been formally appraised at work in the last twelve months and do these appraisals affect your earnings in any way?” the two densities (not shown) confirm that it is relatively easier to be value-committed than strongly-committed. time keeping. 2001) define a team to be autonomous if it has decision rights on at least 4 or 5 out of 8 activities.

vii. On the whole. training contingent on individual assessments involves 10% of employees. do you receive monetary rewards based on the team performance?” (teampay). three of them regard physical working conditions: i. With the exception of lean teams. the overall quality of working conditions as perceived by the employees is measured by a set of categorical variables.(earn). Frequency of exhaustion from work (exhaustion). the data confirm that the frequency of involvement rises with employees’ educational attainment. Frequency of exposure to serious accidents (accidents). ”As a team member. Four variables concern the job content: iv. Job discretion (discretion). 9 . 22% of all employees work in teams. a third of employees work in teams that are held responsible for the output produced and a somewhat lower percentage of workers have some autonomy in matters regarding the team leader and new members. The vector d is therefore composed of these eight variables which vary on a 1-7 Likert scale. π is composed of eleven dummy variables. 14% work in task-autonomous teams. and almost 60% take part in joint meetings. Finally. Over 70% of employees have given some suggestions in the last 12 months. iii. 18 As shown in Table 7 in the Appendix. 17 The latter is obtained by summing the scores of three types of job autonomy: job autonomy on timing and effort. Columns 2-5 of Table 1 report the ranking of the practices by employees’ levels of education. The total score is then re-scaled to 1-7. Probability of unemployment over the next 12 months (unemployment). 48% are members of fully autonomous teams.2. 3.1 Innovative practices and employees’ commitment: descriptive evidence Column 1 in Table 1 ranks workplace practices in descending order of frequency. Strictness of supervisor’s control (supervision). v. Job autonomy on timing and effort (autonomy)17 and a final variable regards job security: viii. Contingent monetary rewards are not very common: earnings linked to individual performance assessments involve 13% of employees while team performance related pay involves 8% of employees. vi. 12% work in task-autonomous-output-responsible teams and 11% work in lean teams. A further question regards contingent training: ”Have you been formally appraised at work in the last twelve months and do these appraisals affect the amount of training you receive?” (train). ii. nearly half of the employees work in teams but only 38% are members of teams with autonomy on tasks and procedures18 . job autonomy on tasks and their sequence and job autonomy on how to do the task. which could also be regarded as a performance-related external intervention. from low to high. Effort intensity (effort intensity). This point will be further discussed in section 5. Job repetitiveness (repetitiveness). of these.

The relationships just described. pride of belonging to the company. contingent training and contingent monetary rewards. the former report significantly higher scores in loyalty. the empirical model is specified as a linear system of equations: d = A1 π + Φz + u1 w = α2 π + β2 d + ϕ 2 z + u 2 Ω = α3 π + β3 d + γ3 w + ϕ3 z + u3 10 (7) (8) (9) . Employees using suggestion schemes and taking part in joint meetings and QC are also more likely to forgo a better paid job to stay with the organization but no innovative practice significantly increases employees’ willingness to take up any job to stay with the firm. As already found by Freeman and Kleiner (2000) on US data. for example. task autonomous teamworking. being unconditional. employees working in lean teams are significantly less inspired by the organization and less in line with its values with respect to the other employees while those working in task autonomous teams are relatively prouder of being part of their organization. On the whole. if larger firms are relatively more likely to adopt innovative practice and can also pay relatively higher wages that motivate their workforce.Descriptive evidence supports the view that employees involved in new workplace practices are relatively more committed to their organization than employees not involved (Table 2). share of values and readiness to work harder for the organization’s success. The next section then turns to the multivariate analysis. could merely capture spurious correlations. being involved in the new practices appears to make a difference more for value than for strong commitment: significantly higher scores in the latter are associated only with joint meetings while relatively higher scores in the former are also associated with suggestion schemes. loyalty and effort but only employees individually appraised declare to be relatively more inspired by the organization and share its values. Contingent rewards are positively associated with employees’ pride. 4 Empirical model By drawing from the theoretical analysis. however. employees working in teams report higher scores in loyalty and willingness to work harder. the relation between employees’ commitment and workplace practices would simply capture the role of firm size.

or to the employee’s unobservable ability. education. for example. a self selection problem may arise. 2006). 4. to some unobservable psychological traits or family characteristics. 2001 and Bresnahan et al. In particular. 2002) show that new workplace practices complement with high skill workers. if controls in the regression only partially capture workers’ heterogeneity in cognitive and non cognitive ability (Heckman et al. sector. the covariance matrix is unlikely to be diagonal because of common components in the error terms. 19 11 . w is the log of the monthly take home relative wage. given the above argument can be informative on the role of innovative practices on employee’s intrinsic motivation. region of residence and others. u2 . See Table13 for the complete list of controls. tenure. γ3 = (1 − λ)c−1 . which is the case if the employee’s preferences underlying her benefit and the cost functions of commitment are constant. familiar status. in this specific case. Osterman (1994).. Wei. Firm controls include: size. The latter possibility is of particular interest as existing results (Caroli and Van Reneen.where d is the vector of categorical variables capturing the quality of the employee’s working conditions. for each practice α3 = λµ(π )c−1 which. occupation. children. Freeman and Keliner (2011). thus avoiding the more common alternative of exclusion restrictions: under full recursiveness the error covariance matrix is diagonal. skill level. as long a c−1 is constant across the two different measures of commitment.19 . in the two types of commitment. Hence.. the empirical γ3 estimated for strong and value commitment are informative on the magnitude of λ across the two types commitment. experience. 20 In a more general framework workplace practices could be regarded as a choice variable on the part of the employer. Ω is either one of the two measures of organizational commitment defined in the previous section. 2001). union presence. region. all equations are identified and OLS estimates are unbiased (Wooldridge. u3 . Specifically. z is the vector of controls. However. Notice that by confronting equation (9) to the corresponding theoretical equation (5). π is the vector of dummies capturing employee’s involvement in innovative practices. Empirical evidence on the determinants of the adoption of innovative practices by the firm see Lynch (2007). one should consider the possibility that the sorting of employees into new work systems may not be random but related. if more Individual controls used in the empirical model include: ID. Again. a useful approach for its identification would be to make it fully recursive using covariance restrictions. A1 and Φ1 are matrices of coefficients and the remaining symbols are row vectors of coefficients.1 Identification and estimation strategy The system (7)-(9) is recursive. by confronting the empirical and the theoretical model. In this case. Both z and π 20 are assumed uncorrelated with the error terms u1 .

I follow van Praag et al. 22 Terza (1987)’s suggested transformation replaces each category j of an ordinal variable by Φj where Φj = E (ϕj |θj −1 < ϕj ≤ θj ) and θj are the (maximum likelihood) normal quintile values of the percentages of the sample observed in category j . I compute the first principal component of the SUR error covariance matrix and use it as an additional regressor in equations (8) and (9). Since d is a vector of qualitative categorical variables. respectively. thus also helping the interpretation of the results. for instance because more able workers were ceteris paribus less strongly committed to the firm because they can count on broader outside opportunities. (2003) and use the first principal component of the estimated residuals from the subsystem of equations (7) to instrument the common component in equations (8) and (9). 2003 for similar considerations. 21 12 . 1992. See also van Praag et al. full recursiveness is then satisfied only if ηi is adequately instrumented. In order to do this. likewise. the use of the Terza-transformed job attributes in place of the original ordinal variables avoids including. a number of dummies equals to the number of categories minus 1. Helliwell and Huang. In the wage equation unobserved ability is also expected to bias the coefficients of job attributes: if more able workers use their endowment to obtain both a better quality job and a higher wage. then the ’price’ of job amenities will be downward biased (Hwang. 2005).. Notice that in the wage and commitment regressions. then the coefficients of both workplace practices and the wage in the commitment regression would be downward biased. Therefore. the wage and commitment equations can then be estimated separately by OLS and ordered probit. This procedure takes care of the endogeneity bias in the wage and commitment equations. Reed and Hubbard. if ability and commitment were related. I first transform the ordinal dependent variables into discrete variables ranging on the real axis as suggested by Terza (1987)22 and then apply Zellner’s seemingly unrelated estimator. Finally.able workers were more likely to be involved in innovative practices and wages and ability were also positively correlated. using factor analysis. in order to allow for correlation across errors of subsystem (7). the coefficients of workplace practices in the wage equation would be upward biased21 . let each error term be the sum of two components: ηi and χis where χis is a pure error unrelated across equations and ηi is a component common to all equations capturing unobservable individual characteristics. for each job attribute.

repetitiveness and reduced autonomy. suitably instrumented as previously discussed. effort intensity and exhaustion all increase when teams self direct the group. is unrelated to most empowerment practices. The SUR estimates23 of the sub-system (7) are reported in Table 3. effort intensity and exhaustion are lower when firms comply with quality norms but the employee’s job autonomy is only marginally higher in this case. On the whole. organizational are dummies. pension fund dummy. ISFOL(2007). Being involved in joint meetings and using suggestions is positively related to job autonomy and discretion and negatively to job repetitiveness. likewise. the validity of the implicit assumption of negligible interaction effects is confirmed by including a dummy for fully autonomous teams in the regressions. see appendix for more details on the controls. group. age squared. thus resulting as the practice that most of all is associated with good job quality. being member of a fully self managed team does not mean greater job autonomy: the sum of the coefficients of team. firm size dummies. fulltime job dummy. age. neither practice. Table 4 reports the estimated wage and commitment equations. skill level dummies. supervision. occupational dummies.5 Results Tables 3 and 4 present the estimated model. strictness of supervision. Adler et al. region dummies. similarly. sector dummies. On the concept of relative wage. hinting to the presence of adverse peers’ pressure effects (Barker. years of tenure. with effort intensity and exhaustion. The relative wage25 . task. Lean teams (team) are also associated with poor intrinsic job content and with exhaustion and. gender dummy. It turns out that innovative practices differ substantially in this respect. The teams’ latitudes in deciding tasks and managing the group also imply greater empowerment although the extent of job autonomy declines when teams are responsible for the output produced. Harley 2001) and casting some doubts on the overall job enrichment of fully autonomous teams. in column (1). however. 1993. 1997. years of experience. All regressions control for the common error component. dummy for workplace located in the south.24 . Finally. its relevance and its measurement see for example Clark and Oswald (1996). intensity of effort. the exceptions are task autonomous All estimations are weighted using the population weight provided in the dataset. education dummies. joint meetings are also negatively associated with the strictness of supervision. 24 23 13 . is significantly associated with the perceived risk of injuries. 25 Following Clark and Oswald (1996).. The existing evidence according to which risks of injuries and occupational illnesses increase with some innovative practices is confirmed only for contingent monetary rewards (earn) which are positively related to both effort intensity and the perceived frequency of accidents. permanent job dummy. they show the extent to which innovative practices are related to the quality of the employee’s working conditions. QC are positively related to exhaustion. resp and teampay is not statistically different from zero. the log of the relative wage is defined as the difference between the individual log wage and a reference log wage defined as the fitted values of the log wage on the following variables and controls: monthly hours of work.

5%. output responsible teams and quality norms depress employees’ intrinsic motivation. relative weight of intrinsic motivation in the employee’s marginal benefit. The linear restriction (TEAM+TASK+GROUP+RESP=0) is not rejected by the data: F (1. the estimated coefficient of each innovative practice is indicative of the relevance of the latter on employees’ intrinsic motivation. Also contingent pecuniary rewards bear only on strong commitment but they significantly crowd out intrinsic motivation: the probability of a high strong commitment (category 6) declines by 1. lean teams. In order to obtain the overall impact of each innovative practice on commitment and determine dΩ∗ /dπ . This is done in the next section. on the contrary. Contingent rewards significantly add to the wage only if monetized on the basis of individual appraisals (earn): in this case the relative wage rises by 9%. Since the relative wage and working conditions are controlled for.1% if they receive a team performance-related pay. On the contrary. which is positive and statistically significant only for strong commitment. The estimated coefficient for the relative wage. fully self directed teams are eventually unrelated to the relative wage26 . 1971). the indirect effects of the practices channeled to commitment via the wage and the working conditions. 26 14 .teamworking which rises the relative wage by 6% and output responsible teamworking which lowers it by 4. These findings nicely accord with the psychological view according to which the remunerative power of the organization can buy only a ’calculative’ type of commitment and may have potentially negative effects on the intrinsic motivation (Etzioni. joint meetings and QC enhance the intrinsic motivation of both value and strong commitment. 2889) = 0. need also be considered. Task autonomous teamworking.16. P rob F = 0. Columns (2)-(5) show the commitment ordered probit estimates and the marginal effects of the practices computed for the second largest category (category 6). the relative wage declines by more than 3% when monetary rewards are based on the team performance or when individual appraisals are used for training purposes (train). suggests that λ.3% if employees are individually appraised and by 2. suggestions schemes have some positive relevance only for value commitment.69. is low when at stake is the decision of staying with the organization and high when matters concern alignment with the firm’s values.

again computed for category 6. the effect of the practices on the intrinsic motivation drives the overall effect thus confirming that this is the main channel activated by the innovative practices. The three components and the total effects are shown in Table 5. If.5. Notice that the marginal effects. joint meeting and QC which rise the probability of a high score by almost 50%. Ωi = (α3 + β3 A1 )πi + γ3 wi + (ϕ3 + β3 Φ1 )zi + u3i + β3 u1i Ωi = (α3 + γ3 α2 )πi + (β3 + γ3 β2 )di + (ϕ3 + γ3 ϕ2 )zi + u3i + γ3 u2i Ωi = (α3 + γ3 α2 + γ3 β2 A1 + β3 A1 )πi + (ϕ3 + γ3 ϕ2 + β3 Φ1 + γ3 β2 Φ1 )zi + u where u = u3i + γ3 u2i + β3 u1i + γ3 β2 u1i The marginal effects of π computed from these reduced forms. In Table 5 practices are ranked in descending order with respect to their overall normalized marginal effects.1 Disentangling the motivational channels In order to quantify the indirect effects of the practices. The ordered probit estimates and the marginal effects are reported in Tables (8) and (9) in the Appendix.6% for value commitment and 7. rising the probability of a high score by 20% at most. dΩ∗ /dπ is positive for all empowerment practices except for the two extreme types of teamworking: lean teams and fully self-managed teams and. as argued (10) (11) (12) 15 . With a few exceptions. allow to distinguish the overall effect of each practice on commitment into its three components: the intrinsic motivation effect α3 . compared with the marginal effect obtained from equation (9). The largest effects on the intrinsic motivation are found on strong commitment and are conveyed by task autonomous teamworking. for the relative wage and for both. I estimate the reduced forms obtained from equation (9) after substituting for working conditions. Receiving any type of contingent reward reduces strong commitment while only contingent team premia reduce value commitment.2% for strong commitment). and for ease of interpretation results for teamworking are presented by type of teams. for quality norms. limited to value commitment. are normalized to the frequency of the category in order to be able to compare the role of each practice on the two types of commitment which have different frequencies in the category of interest (29. The same practices are also the most effective ones on the intrinsic motivation of value commitment but their strength is comparatively lower in this case. the total wage effect γ3 α2 + γ3 β2 A1 and the working conditions effect β3 A1 .

are generally much smaller in size. when it is perceived as informative. λ is smaller in strong commitment than in value commitment. on the contrary. Frey (1997) and Frey and Jegen (2001) argue that crowding out effects depend on the worker’s perception about the employer’s external intervention. is further explored in the next section. and the principal’s gain from such a superior information (the so-called sorting condition ) is a bad news for the employee. specifically. instead. thus ranking as the worst practice. either through the wage or the working conditions. The employee’s perception about the intervention is therefore a key element in Frey (1997) as in Benabou and Tirole (2005). crowding out effects emerge when the principal has some information about the task or about the worker himself that the worker does not have. 5. Similarly. crowding out effects are likely to arise. This result. in both cases they are relatively small. consistent with the idea that employees’ morale might be particularly penalized when the individual effort cannot be explicitly acknowledged. The indirect effects. 16 .before. the sorting condition works in the opposite direction and the final outcome is one of crowding in. The indirect effects conveyed by the wage partly counterbalance the intrinsic motivation effects on strong commitment. these results suggest that ∂µ/∂π is relatively higher in strong commitment. when it is regarded as controlling. In particular. When the signal is.2 A further look at crowding out effects: commitment by education In Benabou and Tirole (2003) crowding out effects are rationalized by the presence of asymmetric information and the corresponding signal perceived by the less informed employee. and are again mostly negative while on value commitment they tend to reinforce intrinsic motivation. the indirect effects working through the job quality are mostly negative on value commitment. Team performance related rewards reduce the probability of a high score in strong commitment by 40%. a less disruptive role of contingent rewards is evident only when they are based on individual appraisals. crowding out effects do not arise or crowding in may take place. Table 12 in the appendix summarizes the results in a schematic way by classifying the practices according to the signs of the three components determining the inequality (6) derived in section 2. favorable to the employee. a result driven in large part by the negative association between team and working conditions and play only a marginal role on strong commitment.

27 . vocational secondary (i. Results are reported in Table 6. In what follows the role of the employee’s perception about the reward is further investigated. The basic assumption is that simple and standard tasks should in principal be paid standard rewards. in this case. are expected to be relatively standard. Likewise. Specifically. the degree of standardization of a task is supposed to be inversely related to the employee’s educational attainment: the more standard tasks are expected to be performed by the less educated workers. or as a controlling device. one could also argue that the type of reward per se is a negative reinforcer because of its monitoring role and its likely uniformity across team members. crowding out effects should be more likely when contingent rewards are used to remunerate standard tasks and less likely when associated with non standard jobs.e. Crowding out effects. crowding in effects emerge when contingent rewards based on individual appraisals are used for tertiary educated employees but the same type of reward produces crowding out effects when used for less educated employees. Crowding out effects are observed for workers with compulsory schooling. results support the view that contingent rewards are perceived as a means of external control. 27 17 . However. for more complex and distinctive tasks a performance related pay should be perceived as being informative of the employees’ effort more than controlling. technical secondary (i. On the contrary. since tasks. Non pecuniary contingent rewards (train) also crowd out motivation when applied to low educated workers.e. 5 years of post compulsory school) and tertiary (i. since crowding out effects are strongly associated with team-performance related rewards (teampay). Thus. and the less standard tasks are expected to be performed by the more educated workers. do not apply when the same reward is used for higher educated workers. a contingent pay in this case would then be regarded as a signal of some bad attributes of the task.e. In order to test this suggestion.The commitment regressions presented in section 5 give credit to the idea that the contingency of a reward and its monetization are relevant for crowding out to emerge and that the degree of crowding out rises when rewards disregard individual efforts. however. ceteris paribus. of which workers are not informed. again suggesting that the sorting condition is favorable to highly educated workers. Regressions by type of schooling are equivalent to saturating the previous model by allowing each regressor to have a different coefficient depending on the education attainment of the employee. thus indicating that they cannot be related to the type of reward per se. I consider four levels of schooling: compulsory. undergraduate and graduate degrees) and I estimate the basic commitment regressions for each of them. from 1 to 3 years of post-compulsory school).

greater discretion. cited in Frey. and may change the marginal cost of effort by affecting the job quality. or to a higher extrinsic motivation. The question has been tackled using a simple model according to which employees choose organizational commitment in an optimal way by equating the marginal benefit and the marginal cost of effort where the marginal benefit from commitment is a weighted average of intrinsic motivation and the relative wage. 1997). a result that accords with other findings for manual workers (see Lane. Results show that empowerment practices that allow a substantial empowerment in terms of greater job autonomy. Innovative practices may change the marginal benefit by affecting employees’ intrinsic motivation and/or by allowing higher pecuniary rewards. basically driven by a higher pay. that is by reinforcing employees’ intrinsic motivation. Such practices. These regressions further confirm that the relative wage is a powerful motivator for compulsory and vocational skill groups to remain attached to the firm but it is ineffective on the value commitment across all educational groups. which influence commitment through the wage and the job quality. whereas their indirect effects. again. for given preferences. and the marginal cost depends on the working conditions. like joint meetings and teamworking with latitude on tasks and procedures.presumably signalling bad task attributes. this implies that λ rises with education. 6 Conclusions Innovative workplace practices are usually associated with high employees’ morale. which grants a higher effort for a given remuneration and job quality. This paper has examined whether the higher organizational commitment associated with innovative workplace practices is ascribable to a higher intrinsic motivation. reduced supervision and reduced repetitiveness. are comparatively smaller. affect commitment mostly directly. 1991 chapter 19. can enhance both the sense of belonging and the attachment to the organization. All these results accord with a use of contingent rewards that rises with employees’ years of schooling. Results also show that employees tend to attach a relative low weight to intrinsic motivation 18 . as observed in the descriptive statistics (Table 1).

A deeper investigation into the crowding out effects supports the view that whether a contingent reward determines crowding out or crowding in essentially depends on how it is perceived by the employee. raise employees’ intrinsic motivation consistently with the idea that they are perceived as genuine signals of trust on the part of the employer.in their marginal benefit functions. Finally. significantly crowd out intrinsic motivation. are. the relative wage helps retaining employees but cannot affect their value commitment. hence crowds out intrinsic motivation. instead. Self managed teams show mixed results on commitment. For more complex tasks. contingent rewards are not found to be negative reinforcers and. moreover. suggesting that specific practices may complement specific skills. when they are concerned with decisions regarding their attachment to the organization and a relatively high weight when considering their identification with the firm’s values. specially if based on the team performance. the findings indicate that the use of contingent rewards for standard tasks is likely seen as a means of control or as a signal of bad task attributes. contingent pecuniary rewards. this paper suggests that firms should invest in empowerment practices both because they are the sole instrument to increase their employees’ sense of identity. largely depending on the extent of autonomy they are granted. On the whole. a result which deserves further investigation. if based on individual appraisals. in accordance with existing experimental results. the empirical relevance of innovative practices differs greatly across educational groups. pecuniary rewards if contingent on performance. but are always a mediocre practice when fully autonomous. 19 . Findings also indicate that the weight attached to intrinsic motivation rises with employees’ educational attainment. These effects are particularly harmful on employees’ attachment to the firm and are only partly compensated by the wage when rewards are contingent on the individual performance. In particular. unwise as they significantly reduce employees’ attachment to the organization while leaving employees’ value commitment unaffected. Contrary to the best empowerment practices. loyalty and share of values and because they outperform the wage in retaining employees.

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02 -0.13** 0.20** 0.19** 0.46** 0.08 538 0.22** 0.02 0.37 0.08* 0.01 0.34 0.38** 0.01 0.10** 0.35** 0.07 0.15** 0.09 0.09 0.35** 0.14 0.43 0.20** 0.47 0.10** 0.21** -0.25 0.20** 0.12 0.12** 0. Table 2: Differences in organizational commitment between employees involved and employees not involved.02 0.20** 0.36** 0.71 0.04 0.03 -0.24** 0.58 0.11** 0.05 0.06 -0. **Significant at the 5% level or less *Significant at the 10 % level .12 Compulsory Vocational Technical Tertiary Notes: Compulsory: 10 years of schooling.04 0.16* 0.27** 0.13 -0.02 0. vocational secondary: 1 to 3 years of postcompulsory school.38 0.03 0.07 -0.38 0.00 -0.33 0.07 0. By workplace practices (1) value comm empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN TRAIN 0.12** -0.03 -0.30** 0.20** 0.36 0.06 0.07 0.02 0.43 0.01 -0.26** 0.24 0.32 0.03 0.41** 0.13 0.38 0.10** 0.07 -0.01 0.04 0.01 -0.29 0.15 -0.16** 0.49 0.10 1709 0.13** 0.09 0.64** 0.09* 0.32** 0.19** 0.08 -0.04 0.06 0.23** 0.36 0.10** 0.38 0.04 (2) strong comm (3) inspires (4) proud (5) share values (6) loyal (7) work harder (8) any job (9) no quit 0.33 0.08 878 0.45 0.16** -0.15 0.49 0.06 0.02 0.05 0.05 -0. observations 0.10 3605 0.19 480 0.26 0.02 -0.75 0.12* 0.33 0.65 0.13** 0.Table 1: Share of employees by workplace practices and educational attainments All employees empowerment practices SUGGEST MEET TEAM QUALITY TASK RESP GROUP QC contingent rewards EARN TEAMPAY TRAIN nr.40** 0.42** 0.07 0.46** 0.18** 0.33 0.06 0.30** 0.00 0.86 0.09 0.46 0.28** 0.50** 0.05 0.10 Notes: Number of observations: 3605.08 0.05 0.23** -0.45 0.23** 0. technical secondary: 5 years of post compulsory school.52 0.23** 0.07 0.02 0.78 0.08 -0.29 0.33** 0.12** 0.46 0.24** 0.03 -0.56 0. tertiary: undergraduate and graduate degrees.05 -0.01 -0.03 0.26** 0.62 0.

11) 0.138 –0.121* (0.069 (0.381* (0.265.198* (0.156 (0.11) –0.28) Yes Yes Yes Yes Yes Yes 0. unemployment (4) Job content repetitiveness supervision (5) (6) discretion (7) autonomy (8) TRAIN constant indiv.164 0.09) –0.19) –0.11) 0.573*** (0.21) 0.039 (0.09) 0.002 (0.10) 0.20) –0.09) –0.06) –0.051 (0.537*** (0.074 (0.09) –0.241** (0.162* (0.765*** (0.361** (0.072*** (0.083 (0.429*** (0.09) 0.013 (0.276*** (0.22) 0.09) 0.313 (0. Breusch-Pagan test of independence: chi2(28) = 1805.22) –0. Pr = 0.22) –2.097 (0.18) 0.643*** (0.206** (0.418*** (0.05) –0.10) –0.05) –0.08) –0.244*** (0.042 (0.123 (0.11) Job security prob.12) –2.05) –0.059 (0.19) –0.20) –0.19) 0.082 (0.05) 0.181 (0.687 (0.057 (0.222** (0.10) –2.331*** (0.168*** (0.22) 0.002 (1.21) –0.718*** (0.010 (0.10) 0.006 (0.98) Yes Yes Yes Yes Yes Yes 0.208*** (0.05) 0.230 (0.341 –0.313*** (0.152 –0.548*** (0.10) 0.10) –0.180* (0.67) Yes Yes Yes Yes Yes Yes 0.217 (0.409*** (0.151 (0.423** (0.11) 0.09) –0.17) –0. Notes: Standard errors in parenthesis.0000. See Appendix for the list of controls 29 .17) 0.364*** (0.393** (0.10) 0.191*** (0.09) –0.Table 3: Overall working conditions Physical working conditions accidents exhaustion effort intensity (1) (2) (3) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN –0.09) 0.13) 0.268 (0.130 (0.09) 0.313*** (0.15) –0.13) 0.24) –0.10) 0.10) –0.126 (0.09) –0.105 (0.072 (0.046 (0.13) 0.279*** (0.075 (0.199 –0.098 (0.54) Yes Yes Yes Yes Yes Yes 0.12) –0.11) 0.318 –0.12) 0.089 (0. Number of observations: 3529 (due to missing values in the sector dummies).255 0.11) 0.152** (0.174 (0.112 (0.17) –6.150*** (0.19) –0.173 (0.10) 0.19) –0.027 (0.184*** (0.11) –0.828*** (0.17) 0.025 (0.010 (0.127 –0.09) 0.06) –0.12) Yes Yes Yes Yes Yes Yes 0.077 (0. controls wrkpl-firm dum 21 region dum 40 sector dum 8 occup dum 10 org dum R sq.09) 0.090 (1.18) –0.108 (0.07) –0.19) 0.296*** (0.05) 0.401*** (0.308*** (0.06) –0.10) –0.23) 0.12) 0.11) 0.12) –0. ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level SUR estimates.089 (0.61) Yes Yes Yes Yes Yes Yes 0.098 (0.09) 0.176 (0.09) –0.16) –0.014 (0.10) 0.53) Yes Yes Yes Yes Yes Yes 0.10) 0.07) 0.513*** (0.375*** (0.05) –0.089* (0.429** (0.134 (0.09) –2.120 (0.038 (0.05) 0.346*** (0.10) –0.100 (0.188*** (0.089 (0.012 (0.05) 0.10) 0.55) Yes Yes Yes Yes Yes Yes 0.269*** (0.06) –0.

12) Yes Yes Yes Yes Yes Yes 3016 –0.10) –0.001 (0.066 (0.193** (0.428** (0.10) –0.02) –0.027 0.001 (0.004 (0.006 (0.05) –0.336*** (0.043*** (0.018 0.10) –0.01) 0.022 (0.08) 0.01) 0.01) –0.140 (0.02) –0.01) 0.08) 0.184*** (0.051** (0.02) –0.035 (0.033 0.00) –0.019 (0.02) –0.021 -0.050 -0.090*** (0.98 of the variance.01) –0.09) 0.004* (0.124* (0.039 (0.061*** (0.032 0.036 (0.08) 0.eff.10) 0.01) –0. marg.030** (0.013 –0.275 (0.09) 0. bold numbers indicate statistical significance at 10% or less.05) 0. marg.02) –0.02) –0.001 -0.09) 0.003* (0.007 (0.014 (0.409*** (0.009 (0.037* (0. The cut points of the ordered probits are not shown for reasons of space.02) 0.001 0.014 (0.257*** (0.09) -0.111** (0.030 relative wage w job attributes accidents exhaustion effort intensity prob.037 Strong commitment ordered prob. (2) (3) Value commitment ordered prob.127 (0.005 (0.007 (0.006 0.08) 0.015 (0.014 (0.02) 0.05) 0. Number of observations are 3016 due to missing values in the wage and the sector dummies.129 (0.01) –0. The marginal effects are computed for category 6.016 0.04) –0.039* (0.05) 0.09) 0.01) –0.eff.038* (0.234*** (0.10) –0.02) –0.20) 0.08) –0.114 (0.149*** (0.352*** (0.10) –0.031 -0.027** (0. it explains a proportion of 0.Table 4: Wage and commitment Wage OLS (1) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN –0.021 0.09) 0.061 -0.081 (0.033 0.02) 0.02) –0. 30 .09) 0. (4) (5) TRAIN 0.08) –0. See Appendix for the list of controls.008 (0. ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level.015 (0.002 (0.05) –0.02) 0.187*** (0.098** (0.015 (0. The instrument for η is the first factor obtained from the factor analysis performed on the SUR residuals using the principal factor method.03) 0.00) –0.047 0.01) –0.09) -0.05) –0.02) 0.288*** (0.00) –0.04) 0. N Yes Yes Yes Yes Yes Yes 3016 Yes Yes Yes Yes Yes Yes 3016 Notes: Standard errors in parenthesis.02) 0.011 (0.045** (0.00) 0.004 (0.047 (0.180*** (0. controls wrkpl-firm dum 21 region dum 40 sector dum 10 org dum 8 soc dum R sq.01) –0.170** (0.002 -0.unemployment repetitiveness supervision discretion autonomy instrument for η constant 0.01) 0.034 -0.010 indiv.149* (0.301*** (0.005 0.05) 0.018 (0.092 -0.048 -0.01) –0.21) 0.052 (0.

monetary rew.004 0.090 -0.112 0.011 0. Direct and indirect effects Strong Commitment Intrinsic motivation (1) (2) (4) Wage Working conditions (3) Total Intrinsic Motivation (1) Wage (2) Value Commitment Working conditions (3) Total (4) 31 average emp.2% for strong commitment.226 0.057 empowerment practices SUGGEST MEET TEAM+TASK TEAM+TASK+RESP QC TEAM+TASK+GROUP SELFTEAM QUALITY TEAM 0.(1) are obtained from the marginal effects of equation (9) and reported in column 1 of Table 9 in the appendix.451 0.477 0. Notes: The normalized marginal effects reported in the Table are obtained as the ratio between the marginal effects (dy/dx).222 -0.006 0.007 0. and the frequency of the category.101 0.180 average emp.038 -0. the marginal effect used in col. All marginal effects are reported in Table9 in the appendix.053 -0. practices contingent rewards APP EARN TEAMPAY APP TRAIN empowerment practices TEAM+TASK MEET QC TEAM+TASK+GROUP TEAM+TASK+RESP QUALITY SUGGEST SELFTEAM TEAM 0.013 -0.145 average cont. TRAIN 0.078 0.071 0.203 -0.(3) are obtained from the difference between the marginal effects of equation (10) and those of equation (9).027 -0.028 -0.023 0.015 0.029 0.163 -0.041 -0.202 0. . The marginal effects used in col.120 -0.012 0.115 0. computed for category 6.015 0.065 -0.022 -0.062 -0. The marginal effects used in col.295 -0.005 -0.035 -0.182 -0. Total is the sum of the previous three columns.033 -0.007 0.089 0.015 -0.019 0.016 0.075 0.026 0.001 0.045 0. The normalization is computed in order to compare the effects of the practices across type of commitments.083 0.029 -0.080 0.Table 5: Normalized marginal effects of empowerment practices and contingent rewards on commitment.392 average cont.129 0.135 0.435 0.112 -0.067 -0.107 -0.012 -0.(2) are obtained from the difference between the marginal effect of equation (12) and those of equation (10).436 0.005 -0.028 -0.060 0.197 0.092 -0.159 0.301 0.008 0.069 0.206 0.102 -0. monetary rew.047 -0.016 0.008 0.005 0.062 0.003 0.038 0. notice that the wage indirect effects also include the interacted wage-working conditions effects.066 -0.155 0.262 0.451 0.064 -0.347 0.018 0.239 0.063 -0. practices contingent rewards EARN TEAMPAY -0. SELFTEAM corresponds to TEAM+TASK+GROUP+RESP.081 -0.023 0.039 -0.100 0.6% for value commitment and 7.037 -0.008 -0.020 -0.020 -0.035 -0.078 -0.072 -0.453 0.110 0.066 -0.016 0.015 0.146 0.073 0.033 0.129 -0.092 0.083 -0.215 0. the frequency of category 6 is 29.111 -0.

389*** (0.003 (0.07) 0.046 (0.22) –0.51) 0.189 (0.Table 6: Commitment by education.805** (0.268 (0.14) Yes Yes Yes Yes Yes 1449 –0.11) –0.13) 0.22) –0.13) 0.498** (0.088 (0.19) –0.552** (0.27) –0.097 (0.07) 0.273 (0.30) Yes Yes Yes Yes Yes 354 0.12) 0.13) –0.17) 0.12) 0.120 (0.32) 0.277 (0.155 (0.24) 0.11) 0.13) –0.011 (0.12) 0.055 (0.229 (0.400*** (0.078 (0.460*** (0.37) 0.547** (0.31) Yes Yes Yes Yes Yes 354 Notes: Standard errors in parenthesis.920*** (0.14) –0.269 (0.23) 0.206* (0.571 (0.53) –0.16) 0.695 (0.15) 0.190 (0.302** (0.25) 0.51) 1.854*** (0.002 (0.439*** (0.013 (0.26) 0. ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level.23) 0.20) 0.24) –0.098 (0.18) –0.431 (0.24) –0.228 (0.21) –0.19) 0.079 (0.021 (0.13) Yes Yes Yes Yes Yes 1449 0.13) –0.407*** (0.17) 0.23) 0.153 (0.228 (0.28) –0.20) 0.278 (0.23) Yes Yes Yes Yes Yes 462 0.275 (0.108 (0.166 (0.066 (0.273* (0.173 (0.34) 0.063 (0.13) 0.30) 0.442*** (0.31) –0.071 (0.12) 0.25) –0.043 (0.22) 0.175 (0.598 (0.15) –0.496*** (0.723*** (0.213 (0.18) Yes Yes Yes Yes Yes 751 0.194 (0.39) 0.18) Yes Yes Yes Yes Yes 751 0.27) 0.08) –0.19) –0.089 (0.062 (0.26) –0.010 (0.403 (0. .15) 0.483*** (0.23) –0.14) 0.11) –0.149 (0.24) Strong commitment (2) (3) vocational technical (4) tertiary (5) compulsory (8) tertiary Value commitment (6) (7) vocational technical 32 TRAIN relative wage w job attributes other conts wrkpl-firm dum sector dum org dum N 0.07) –0.27) 0.27) 0.538*** (0.11) 0.208 (0.187 (0.143 (0. see also Notes to Table 4.28) 0.350* (0.30) –0.098 (0.20) –0.13) 0.422* (0.14) –0.351*** (0.421 (0.54) –0.14) 0.729*** (0.037 (0.23) 0.11) 0.11) –0.08) 0.35) –0.25) –0.154 (0.089 (0.22) Yes Yes Yes Yes Yes 462 –0.24) –0.076 (0.15) –0.233 (0.29) –0.06) –0.323* (0.073** (0.19) –0.10) –0.053 (0.069 (0.539** (0.19) –0.466*** (0.042 (0.25) 0. Ordered probit (1) compulsory empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN –0.057 (0.15) 0.039 (0.25) 0.191*** (0.391*** (0.29) –0.142 (0.099 (0.051 (0.19) 0.122 (0.143 (0.181 (0.28) –0.187 (0.

A Appendix .

53 output responsible 1 0 1 0 102 2.63 12.83 6.25 47. employees % of total employees % of team-workers 34 .25 2.59 task auto & output resp 1 1 1 0 203 5.42 task & group autonomous 1 1 0 1 45 1.05 group autonomous 1 0 0 1 10 0.57 lean 1 0 0 0 184 5.28 0.67 fully autonomous 1 1 1 1 802 22.04 output resp & group auto 1 0 1 1 7 0.80 14.10 10.19 0.Table 7: Types of teams task autonomous 1 1 0 0 245 6.91 TEAM TASK RESP GROUP nr.

241*** (0.350*** (0.07) 0.02) –0.033* (0.14) Yes Yes Yes Yes Yes Yes 3529 0.127 (0.04) –0.014 (0.05) –0.03) 0.021 (0.08) 0.004 (0.08) –0.07) 0.018 (0.08) –0.07) 0.08) 0.05) –0.09) –0.189*** (0.185** (0.08) (2) (3) (4) Value commitment (5) (6) TRAIN relative wage w job attributes accidents exhaustion effort intensity prob unemployemnt repetitiveness supervision discretion autonomy instrument for η 0.290*** (0.04) –0.04) –0.09) 0.030 (0.362*** (0.132 (0.05) –0.174** (0.063 (0.065 (0.08) –0.08) –0. The cut points of the ordered probits are not shown for reasons of space.142*** (0.08) 0.05) –0.04) 0.083** (0.300*** (0.015* (0.217*** (0.017 (0.08) –0.02) 0.036 (0.030 (0.340*** (0.05) 0.182*** (0.045 (0.120 (0.140 (0.08) –0.041 (0.045 (0.08) 0. The instrument for η is the first factor obtained from the factor analysis performed on the SUR residuals using the principal factor method.08) –0.241*** (0.04) 0.10) 0.085 (0.03) –0.03) Yes Yes Yes Yes Yes Yes 3016 Yes Yes Yes Yes Yes Yes 3529 –0.273*** (0.14) Yes Yes Yes Yes Yes Yes 3529 0.08) 0.04) 0.205*** (0.492*** (0.02) –0.01) –0.05) –0.022 (0.055 (0.401*** (0.08) –0.019 (0.08) –0.08) 0.08) 0.151*** (0.423*** (0.207*** (0.05) 0.012 (0.08) –0.Table 8: Estimated reduced forms of commitment equations Strong commitment (1) empowerment practices SUGGEST QC MEET QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN –0.10) –0.05) –0.297*** (0.073 (0.109 (0.01) 0.102 (0.02) 0.106 (0.090 (0.08) –0.058 (0.026 (0.287*** (0.09) 0.01) –0.10) –0.107*** (0.07) 0.08) 0.014 (0.292*** (0.066 (0.046*** (0.09) –0.03) –0.09) –0.94 of the variance.160* (0. Ordered Probit estimates.09) 0.02) –0. it explains a proportion of 0.177** (0.09) –0.267*** (0.02) –0.08) –0.07) 0.09) –0.04) 0.08) 0.056 (0.004 (0.109 (0.117 (0.167** (0.133*** (0.160** (0.08) 0.259*** (0.09) –0.01) 0.08) –0.040*** (0.08) –0.255*** (0.057 (0.106 (0.03) Yes Yes Yes Yes Yes Yes 3016 Yes Yes Yes Yes Yes Yes 3529 indiv conts wrkpl-firm dum 21 region dum 40 sector dum 10 org dum 8 soc dum R sq. N Notes: Standard errors in parenthesis.318*** (0.415*** (0.146*** (0.028 (0.168*** (0.01) –0.238*** (0.05) 0.024** (0.001 (0.09) 0.08) –0.354*** (0.214** (0.08) 0. See Appendix for the list of controls.04) –0.08) 0.128*** (0.08) –0.08) 0.330*** (0.05) 0.172** (0.08) 0. ***Significant at the 1% level **Significant at the 5% level *Significant at the 10 % level.05) 0.274*** (0. 35 .01) –0.08) 0.

004 -0. columns 2 show the marginal effects after substituting for the wage.051 -0.033 0. corresponding to equation (11) in the text.024 -0.001 0.003 -0.038 -0.Table 9: Marginal effects from the structural and the reduced form models (1) practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN TRAIN relative wage w 0.002 0.023 -0.025 0.017 0.007 0.005 (1) 0.014 0.033 0.106 -0.048 -0.034 -0.018 Strong commitment (2) (3) -0.027 -0.027 0.012 0.095 -0.032 0.046 0.000 -0.018 (4) 0.032 0.036 -0.018 -0.002 0.027 -0.014 (4) 0.6% whereas the frequency of strong commitment in the same category is 7. columns 3 show the marginal effects after substituting for working conditions corresponding to equation (10) in the text.038 -0.041 -0. Bold coefficients are significant at least at 10%.2%.061 -0.024 0.003 -0.029 0. 36 .005 0.030 0.006 0.047 0.031 0.046 -0.021 -0.016 0.045 -0.030 -0.028 -0.067 0.010 Value commitment (2) (3) 0.050 0.041 0.002 0.019 0.032 0.040 0.003 0.001 -0.033 0.066 0.108 -0.001 0.006 -0.078 0.031 -0.016 0.037 -0. the marginal effects are relative to category 6.033 0.021 0.028 0.026 -0.043 Notes: Columns 1 show the marginal effects from equation (9) in the text.024 -0.011 -0.029 0. columns 4 show the marginal effects after substituting for both the wage and working conditions.002 -0.010 -0.004 -0.071 0. Recall that value and strong commitment are 1-7 categorical variables.053 -0.033 -0.036 -0.006 0.077 -0. the frequency of value commitment in category 6 is 29.092 -0.013 0.030 -0.017 -0. corresponding to equation (12) in the text.050 -0.069 0.

009 (0.011*** (0.073*** (0.06) 0.Table 10: The wage regression by educational attainments compulsory (1) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN –0.036 (0.42) Yes Yes Yes Yes 0.019 (0.01) 0.02) –0.211*** (0.013 (0.03) 0.01) –0.05) 0.001 (0.01) –0.02) 0.144** (0.027 (0.005 (0.01) –0.35) Yes Yes Yes Yes 0.169*** (0.050 (0.023 (0.01) –0.04) –0.00) 0.929*** (0.01) –0.013 (0.023 (0.004 (0.017 (0.01) 0.031 (0.006 (0.020*** (0.06) 0.10) –0.005 (0.06) 0.03) 0.007 (0. 37 .04) –0.01) –0.01) –0.01) –0.006 (0.020 (0.118** (0.05) –0.05) –0.03) –0.008 (0.044** (0.04) –0.06) –0.005 (0.03) –0.01) –0.050 (0.02) 0.009* (0. See Appendix for list of controls and Notes to Table 4.02) –0.831 354 Notes: Standard errors in parenthesis.042 (0.086*** (0.002 (0.02) 0.017 (0. N 0.08) 6.094** (0.01) –0.02) 0.047 (0.095** (0.03) –0.03) 0.012 (0.01) 0.024 (0.001 (0.06) 0.02) 0.04) 4.011 (0.119* (0. ***Significant at the 1% level **Significant at the 5% level *Significant at the 10% level.07) 0.01) –0.16) Yes Yes Yes Yes 0.073*** (0.06) 0.006 (0.07) –0.24) Yes Yes Yes Yes 0.00) 0.02) 0.004 (0.553 462 –0.001 (0.012** (0.010 (0.00) –0.061*** (0.004 (0.004 (0.013 (0.04) –0.632 751 0.014 (0.041 (0.00) –0.115*** (0.04) 0.00) –0.020 (0.05) –0.09) 6.01) 0.324*** (0.019 (0.04) 0.01) –0.03) 0.001 (0.005* (0.014*** (0.03) 0.04) 0.001 (0.036 (0.639 1449 0.04) –0.069* (0.007 (0.016* (0.03) –0.06) 0.06) 0.00) 0.075** (0.069 (0.088*** (0.02) 0.01) 0.01) –0.06) 0.001 (0.016 (0.024 (0.06) 5.008 (0.10) 0.02) –0.01) 0.07) vocational (2) technical (3) tertiary (4) TRAIN job attributes accidents exhaustion effort intensity prob unemployement repetitiveness supervision discretion autonomy instrument for η constant oother conts wrkpl-firm dum sector dum org dum R sq.181** (0.01) –0.018 (0.034** (0.02) 0.017 (0.070** (0.107** (0.04) –0.03) 0.010 (0.04) –0.132 (0.01) 0.221*** (0.

TEAM+RESP Notes: Practices are classified according to their estimated effects shown in Table 5. TRAIN TEAM+TASK+GROUP. MEET. SUGG. SELFTEAM QUALITY. TRAIN TEAM+TASK.Table 11: Values of λ to satisfy dΩ∗ /dπ > 0. Sign of the marginal effect on: Intrinsic motivation Total Wage Working conditions α3 γ3 α2 + γ3 β2 A1 β3 A1 + + + + – – – – + + – – + + – – + – + – + – + – TEAM+TASK. ∆ = dw/dπ .TEAM+TASK+RESP. Notes: For convenience we let: a3 = ∂µ/∂π . 38 . MEET. Bold typeface indicate that the overall effect on commitment is positive. QC. EARN TEAM TEAMPAY QC QUALITY TEAM TEAMPAY SELFTEAM Strong Commitment Value Commitment SUGG. a1 = ∂d/∂π Table 12: Classification of practices according to their estimated marginal effects. Intrinsic motivation ∂µ/∂π a3 + + + + – – – – Total Wage dw/dπ ∆ + + – – + + – – Working condition ∂ d/∂π a1 + – + – + – + – Values of λ (λ > 0) for dΩ∗ /dπ > 0 Notes for all λ λ > (b3 |a1 | − ∆)/(a3 − ∆) λ > (|∆| − b3 a1 )/(a3 + |∆|) λ > (|∆| + b3 a1 )/(a3 + |∆|) λ < (∆ + b3 a1 )/(|a3 | + ∆) λ < (∆ − b3 |a1 |)/(|a3 | + ∆) λ < (b3 a1 − |∆|)/(|a3 | + |∆|) for no λ for for for for for for for all λ if a3 > ∆ > b3 |a1 | no λ if a3 < ∆ < b3 |a1 | all λ if |∆| < b3 a1 sufficiently large λ sufficiently small λ no λ if ∆ < b3 |a1 | no λ if |∆| > b3 a1 .

39 .Table 13: List of controls included in regressions individual controls: female age age squared experience tenure high school vocational high school technical high school university master/doctorate first degree union member full time job permanent job commuting cost% pension/insurance scheme overeducation* extent of pc use skill level shift work supervisor child dummy child below 6 yrs dummy married divorced nr. negative value indicate an educational deficit. % Commuting cost is computed on the basis of the distance between the county town of the workplace location and the county town of residence and imputing the estimated cost of motoring. child mother married mother not married 8 occupational dummies 17 organizational area dummies firm and workplace controls: workplace located in the South union presence job prevalent female job prevalent male wrkp size dummy2 (5 to 15) wrkp size dummy3 (15 to 50) wrkp size dummy4 (more than 50) firm size dummy2 (15 to 100) firm size dummy3 (100 to 500) firm size dummy4 (more than 500) 40 sector dummies 21 region dummies *Overeducation is given by the difference between the actual level of education and the respondent’s assessment of the education level actually needed to cover the position she holds: positive values indicate excess education.

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