When Are Signing Bonuses More than Just "Pay to Play"? An Experimental Investigation Open Access

Abstract

Abstract

When Are Signing Bonuses More than Just "Pay to Play"? An Experimental
Investigation
By Jongwoon Choi
I investigate the conditions under which offering a signing bonus positively
affects worker effort. Extant research highlights the potential for trust to function as a
mechanism by which a signing bonus offer can positively affect effort. However, the
efficacy of trust serving this role hinges on workers' attributions for the signing bonus
offer. I posit that labor market competition - whether there is an excess demand for labor
or an excess supply of labor - affects these attributions. Specifically, I predict and find
that offering a signing bonus more positively affects both workers' beliefs regarding the
employer's trust in them as well as their effort when there is excess supply than when
there is excess demand. However, I also find that the benefits of offering a signing bonus
are short-lived due to the higher effort expectations that accompany a signing bonus offer
when there is an excess supply of labor, and the lower propensity for workers receiving a
signing bonus when there is excess supply to fulfill those expectations relative to workers
not receiving a signing bonus or workers receiving a signing bonus when there is excess
demand.

When Are Signing Bonuses More than Just "Pay to Play"? An Experimental
Investigation
By
Jongwoon Choi
B.S.B.A., Washington University in St. Louis, 2005
M.Acc., The Ohio State University, 2006
Advisor: Kristy Towry, Ph.D.
A dissertation submitted to the Faculty of the
James T. Laney School of Graduate Studies of Emory University
in partial fulfillment of the requirements for the degree of
Doctor of Philosophy
in Business
2011

Table of Contents

Table of Contents

I. DISSERTATION 1. Introduction 1 2. Theory and Hypotheses 6 2.1. Background 6

2.2. Signing Bonus Offers, Worker Effort, and Trust 7

2.3. Workers' Attributions and Labor Market Competition 12

3. Method 15 3.1. Overview 15 3.2. Procedures 18 3.3. Payoff Parameters 20 3.4. Session Timeline 21 4. Results 22 4.1. Economic Theory Prediction 22

4.2. Employers' Contract Offer and Workers' Contract Offer Acceptance Decisions 23

4.3. Hypothesis 1 23 4.4. Hypothesis 2 25 4.5. Path Analysis 26 4.6. Employer and Worker Welfare 28

4.7. Self-Reinforcing Properties of Trust 29

5. Conclusion 34 6. References 36 II. FIGURES

1. Figure 1: Predicted Effects of Offering a Signing Bonus

and Labor Market Competition on Workers' Beliefs

Regarding the Employer's Trust in Them and Effort 43

2. Figure 2: Effects of Offering a Signing Bonus and Labor Market

Competition on Workers' First Period Trust Beliefs 44

3. Figure 3: Effects of Offering a Signing Bonus and Labor Market

Competition on Workers' First Period Effort 45

4. Figure 4: Path Analysis Results of Estimated Links

Among Theoretical Constructs 46

5. Figure 5: Effects of Offering a Signing Bonus and Labor Market

Competition on Workers' Second Period Trust Beliefs 47

6. Figure 6: Effects of Offering a Signing Bonus and Labor Market

Competition on Workers' Second Period Effort 48

III. TABLES 1. Table 1: Cost of Effort Schedule 49

2. Table 2: Employers' Contract Offer and

Workers' Contract Acceptance Decisions 50

3. Table 3: Descriptive Statistics 52 4. Table 4: Planned Contrast Results 54

5. Table 5: Employers' and Workers' Welfare 55

6. Table 6: Employers' Retention Decisions 57

7. Table 7: Employers' First Period Effort Expectations 59

IV. APPENDIX 1. Instructions 61 2. Instructions Quiz 82 3. Payoff Charts 86

4. Representative Screenshots for Employers 89

5. Representative Screenshots for Workers 101

6. Post-Experimental Questionnaire - Hiring Employers 116

7. Post-Experimental Questionnaire - Non-Hiring Employers 126

8. Post-Experimental Questionnaire - Hired Workers 134

9. Post-Experimental Questionnaire - Non-Hired Workers 149

About this Dissertation

Rights statement

• Permission granted by the author to include this thesis or dissertation in this repository. All rights reserved by the author. Please contact the author for information regarding the reproduction and use of this thesis or dissertation.

School	Laney Graduate School
Department	Business
Degree	PhD
Submission	Dissertation
Language	English
Research Field	Business Administration, Accounting
Keyword	Attribution Theory Signing Bonus Labor Markets Market Competition
Committee Chair / Thesis Advisor	Towry, Kristy, Emory University
Committee Members	Hecht, Gary, Emory University Waymire, Gregory, Emory University Kadous, Kathryn, Emory University

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