Fair or Foul?: The Effects of External,Internal,and Employee Equity on Changes in Performance of Major League Baseball Players

Abstract

We propose six hypotheses that relate employee, internal, and external inequities to changes in performance. We test these hypotheses with a sample of 362 Major League Baseball players. The findings showed that overpayment (as measured by actual employee and external inequities) is a significant predictor of positive performance changes, underpayment is a significant predictor of negative performance changes, and employee equity is a greater predictor of change in performance than internal equity.

Keywords

equity compensatio overpayment pay performance

Get full access to this article

View all access options for this article.

References

ADAMS, J. S. Toward an understanding of inequity. Jourmal of Abnormal and Social Psychol-ogy 1963, 67, 422-436.

ADAMS, J. S. Inequity in social exchange. In L. Berkowitz (Ed.), Advances in Experimental Social Psychology, 1965, 2, 267-299.

ANDREWS, I. R. , & HENRY, M. M. Management attitudes toward pay. Industrial Relations, 1963, 3, 29-39.

ALAIN, M. An empirical validation of relative deprivation. Hutman Relations, 1985, 38, 739-749.

BRETZ, R. D., Jr. , & THOMAS, S. L. Perceived equity, motivation, and final-offer arbitration in Major League Baseball. Journal of Applied Psychology, 1992, 77, 280-287.

CAMPBELL, J. P. , & PRITCHARD, R. D. Motivation theory in industrial and organizational psychology. In M. Dunnette (Ed.), Handbook of industrial and organizational psychology. Chicago: Rand McNally, 1976.

COFF, R. W. Human assets and management dilemmas: Coping with hazards on the road to resource-based theory. Academy of Management Review, 1997, 22, 374-402.

COHEN, S. G. , CHANG, L. , & LEDFORD, G. E., Jr. The hierarchical construct of self-management leadership and its relationship to quality of work life and perceived work group effectiveness. Personnel Psychology, 1997, 50, 275-308.

COOK, T. D. , CROSBY, F. , & HENNIGAN, K. M. The construct validity of relative depri-vation. In Suls, J. M. et al. (Eds.), Social comparison processes. Hemisphere Publishing Corporation: Washington D. C., 1977.

10.

COSIER, R. A. , & DALTON, D. R. Equity theory and time: A reformulation. Academy of Management Review, 1983, 8, 311-319.

11.

COWHERD, D. M. , & LEVINE, D. I. Product quality and pay equity between lower-level employees and top management: An investigation of distributive justice theory. Admin-istrative Science Quarterly, 1992, 37, 302-320.

12.

DANSEREAU, F. , ALUTTO, J. A. , & YAMMARINO, F. J. Theory testing in organizational behavior: The Variant Approach. Englewood Cliffs, NJ: Prentice-Hall, 1984.

13.

DAVIS, J. H. The future of salary surveys when jobs disappear. Compensation and Benefits Review, 1997, 29(1), 18-26.

14.

DUCHON, D. , & JAGO, A. G. Equity and the performance of Major League Baseball play-ers: An extension of Lord and Hohenfeld. Journal of Applied Psychology, 1981, 66, 728-732.

15.

DYER, L. , SCHWAB, D. P. , & THERIAULT, R. D. Managerial perceptions regarding salary increase criteria. Personnel Psychology, 1976, 29, 233-242.

16.

FESTINGER, L. A. A theory of cognitive dissonance. Evanston, IL: Row, Peterson, 1957.

17.

FINN, R. H. , & LEE, S. M. Salary equity: Its determination, analysis and correlates. Journal of Applied Psychology, 1972, 56, 283-292.

18.

FOK, L. Y. , HARTMAN, S. J. , VILLERE, M. F. , FREIBERT, R. C. III . A study of the impact of cross cultural differences on perceptions of equity and organizational citizenship behavior. International Journal of Management, 1996, 13, 3-14.

19.

FREEDMAN, S. M. , & MONTANARI, J. R. An integrative model of managerial reward allocation. Academy of Management Review, 1980, 5, 381-390.

20.

GLASS, R. S. , & WOOD, W. A. Situational determinants of software piracy: An equity theory perspective. Journal of Business Ethics, 1996, 15, 1189-1198.

21.

GOODMAN, P. S. , & FRIEDMAN, A. An examination of Adams' theory of unequity. Ad-ninistrative Science Quarterly, 1971, 16, 271-288.

22.

GREENBERG, J. Approaching equity and avoiding inequity in groups and organizations. In J. Greenberg and R. L. Cohen (Eds.), Equity and justice in social behavior. New York: Academic Press, 1982.

23.

GREENBERG, J. , & ORNSTEIN, S. High status job title as compensation for underpayment: A test of equity theory. Journal of Applied Psychology, 1983, 68, 295-297.

24.

HARDER, J. W. Play for pay: Effects of inequity in a pay-for-performance context. Admin-istrative Science Quarterly, 1992, 37, 321-335.

25.

HAYS, W. L. Statistics (4th ed.). Fort Worth, TX: Holt, Rinehart and Winston, 1988.

26.

HENEMAN, H. G. III , SCHWAB, D. P. , STANDAL, J. T. , & PETERSON, R. B. Pay com-parisons: Dimensionality and predictability. Academy of Management Proceedings, 1980, 38, 211-215.

27.

HILL, J. R. , & SPELLMAN, W. Pay discrimination in baseball: Data from the seventies. Industrial Relations, 1984, 23, 103-112.

28.

HILLS, F. S. The relevant other in pay comparisons. Industrial Relations, 1980, 19, 345-351.

29.

HOLLANDER, Z. (Ed.). The complete handbook of baseball. New York: Penguin, 1993.

30.

HOWARD, L. W. , & MILLER, J. L. Fair pay for fair play: Estimating pay equity in profes-sional baseball with data envelopment analysis. Academy of Management Journal, 1992, 36, 882-894.

31.

HUSEMAN, R. C. , HATFIELD, J. D. , & MILES, E. W. A new perspective on equity theory: The equity sensitivity construct. Academy of Management Review, 1987, 12, 222-234.

32.

KING, W. C., Jr. , MILES, E. W. , & DAY, D. D. A test and refinement of the equity sensitivity construct. Journal of Organizational Behavior, 1993, 14, 301-317.

33.

KLEIN, S. M. Pay factors as predictors to satisfaction: A comparison of reinforcement, equity, and expectancy. Academy of Management Journal, 1973, 16, 598-610.

34.

LAWLER, E. E. Managers' attitudes toward how their pay is and should be determined. Journal of Applied Psychology, 1966, 50 273-279.

35.

LAWLER, E. E. Pay and organizational development. Reading, MA: Addison-Wesley, 1981.

36.

LORD, R. G. , & HOHENFELD, J. A. Longitudinal field assessment of equity effects on the performance of Major League Baseball players. Journal of Applied Psychology, 1979, 64, 19-26.

37.

MARKHAM, S. E. Pay-for-performance dilemma revisited: Empirical example of the impor-tance of group effects. Journal of Applied Psychology, 1988, 73, 172-180.

38.

MARTIN, J. E. , & PETERSON, M. M. Two-tier wage structures: Implications for equity the-ory. Academy of Management Journal, 1987, 30, 297-315.

39.

MIDDLEMIST R. D. , & PETERSON, R. B. Test of equity theory by controlling for com-parison co-workers' efforts. Organizational Behavior and Human Performance, 1976, 15, 335-354.

40.

MOORMAN, R. H.

Relationship between organizational justice and organizational citizenship behaviors: Do fairness perceptions influence employee citizenship?

Journal of Applied Psy-chology, 1991, 76, 845-855.

41.

MOWDAY, R. T. Equity theory predictions of behavior in organizations. In R. M. Steers and L. W. Porter (Eds.), Motivation and work behavior (3rd Ed.). New York: McGraw-Hill, 1983, pp. 91-113.

42.

PAYTEN, T. H. Pay: Employee compensation and incentive plans. New York: The Free Press, 1977.

43.

PFEFFER, J. , & DAVIS-BLAKE, A. Salary dispersion, location in the salary distribution, and turnover among college administrators. Industrial and Labor Relations Review, 1992, 45 753-763.

44.

PFEFFER, J. , & LANGTON, N. The effect of wage dispersion on satisfaction, productivity, and working collaboratively: Evidence from College and University faculty. Administrative Science Quiarterly, 1993, 38 382-407.

45.

PRITCHARD, R. D. Equity theory: A review and critique. Organizational Behavior and Hu- man Performance, 1969, 4, 176-211.

46.

ROBERTS, J. A. , & CHONKO, L. B. Pay satisfaction and sales force turnover: The impact of different facets of pay on pay satisfaction and its implications for sales force manage-ment. Journal of Managerial Issues, 1996, 8, 154-169.

47.

ROCK, M. L. Handbook of wage and salary administration. New York: McGraw Hill, 1984.

48.

ROMANOFF, K. , BOEHM, K. , & BENSON, E. Pay equity: Internal and external considera-tions. Compensation and Benefits Review, 1986, 18(3), 17-25.

49.

RONEN, S. Equity perceptions in multiple comparisons: A field study. Human Relations, 1986, 4, 333-346.

50.

SIMPSON, A. , & BERARDINO, M. (Eds.). Baseball America's 1993 Almanac. Boston: Base-ball America, 1986.

51.

STOUFFER, S. A. , SUCHMAN, E. A. , DeVINNEY, L. C. , STAR, S. A. , & WILLIAMS, R. M., Jr. The American soldier: Adjustment dtring army life. Princeton, NJ: Princeton Uni-versity Press, 1949.

52.

THORN, J. , & PALMER, P. (Eds.). Total baseball. New York: Harper Collins, 1993.

53.

WEICK, K. E. , BOUGON, M. G. , & MARUYAMA, G. The equity context. Organizational Behavior and Hiuman Performance, 1976, 15, 32-65.

54.

XIN, K. R. , & PEARCE, J. L. Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 1996, 39, 1641-1658.

55.

YAMMARINO, E. J. , & DUBINSKY, A. J. Superior-subordinate relationships: A multiple levels of analysis approach. Human Relations, 1992, 45, 575-600.

56.

YOUNDT, M. A. , SNELL, S. A. , DEAN, J. W, Jr. , & LEPAK, D. P. Human resource man-agement, manufacturing strategy, and firm performance. Academy of Management Journal, 19"6, 39, 836-866.