We examine how reciprocity affects the relation between performance target levels and effort across single- and repeated-interaction settings. Using a laboratory experiment where participants make choices from a payoff matrix representing target and effort levels, we model a setting where employee-participants have economic incentives to respond to higher target assignments by superiorparticipants with higher effort. However, reciprocity could lead employees to reward low target assignments with high effort and punish high target assignments with low effort. In a single-interaction setting where only innate preferences can drive reciprocal behavior, we find that superiors select higher targets and that employees generally respond with higher effort. In a repeated-interaction setting where reciprocal behavior can emerge for strategic reasons, we find that superiors set lower targets and that employees generally respond to low targets with high effort and to high targets with low effort. Collectively, our results suggest that reciprocity plays a limited role in affecting target and effort levels in a single-interaction setting. Rather, reciprocity appears to emerge for more strategic reasons brought on by repeated interactions. As most work relationships extend over multiple periods, our results may help explain why organizations tend to set readily achievable performance targets.
|Number of pages||20|
|Journal||Journal of Management Accounting Research|
|State||Published - Sep 1 2015|
Bibliographical notePublisher Copyright:
© 2015, American Accounting Association. All rights reserved.
- Performance target setting
- Social preferences
ASJC Scopus subject areas
- Business and International Management