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Winning at a Losing Game? Side-Effects of Perceived Tournament Promotion Incentives in Audit Firms

  • Jorien L. Pruijssers
  • Pursey P. M. A. R. Heugens
  • J. van Oosterhout
Article

Abstract

Tournament-like promotion systems are the default in audit firms, which are generally internally owned professional partnerships. While awarding promotions in a contest-like fashion stimulates contestants’ motivation and productivity, it may also upset an organizations’ ethical climate and trigger ethically adverse behaviors. Since nearly all research on promotion tournaments in management has been conducted in public firms, little is known about how these incentive systems operate in professional partnerships. In this study, we analyze how the perception of the two controllable design parameters of promotion tournaments—the relative pay spread between winners and losers and tournament breadth in terms of the number of contestants that compete for a prize—affects audit firm behavior. Survey results provide evidence that the tournament’s perceived breadth prompts adverse behavior, as it does in public firms. Contrary to conventional wisdom, however, the perceived pay spread has no significant effect on adverse behavior, but triggers desirable behaviors instead. Our study suggests that promotion tournaments indeed provide powerful incentives, but also that understanding the unintended consequences of these incentives on organizational ethical climates and behavior requires tournament theory to be contextualized when it is applied in new settings like internally owned professional partnerships.

Keywords

Adverse behavior Tournament theory Incentive systems Pay spread Audit firms 

Notes

Compliance with Ethical Standards

Conflict of interest

The authors declare that they have no conflict of interest.

Research Involving Human Participants

All procedures performed in our study involving human participants were in accordance with ethical standards of the authors’ institution.

Informed Consent

Informed consent was obtained from all individual participants involved in the study who voluntarily completed the survey.

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Copyright information

© Springer Nature B.V. 2018
corrected publication September 2018

Authors and Affiliations

  • Jorien L. Pruijssers
    • 1
  • Pursey P. M. A. R. Heugens
    • 2
  • J. van Oosterhout
    • 2
  1. 1.Desautels Faculty of ManagementMcGill UniversityMontrealCanada
  2. 2.Department of Strategic Management & Entrepreneurship, Rotterdam School of ManagementErasmus UniversityRotterdamThe Netherlands

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