REWARD STRUCTURES IN HIERARCHICAL TEAMS: EFFECTS ON KNOWLEDGE SHARING AND TEAM PERFORMANCE
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This study examines how the allocation of a fixed team reward affects managers’ effort, operationalized as knowledge-sharing behavior, and overall team performance, and whether subordinates’ promotion incentive moderates these effects. I propose a reward structure that provides managers with a direct financial incentive and subordinates with an indirect promotion incentive. In an experiment, I manipulate reward allocation (manager-takes-all vs. equal-sharing) and promotion incentive (promotion vs. no-promotion). I predict that allocating the entire team reward to managers increases their effort to share knowledge by enhancing reward valence, though the effect may weaken if they doubt subordinates’ engagement. Subordinates perceive pay disparities under manager-takes-all as fair when promotion opportunities exist, activating promotion incentive and improving their performance. Consequently, team performance under manager-takes-all with a promotion incentive is higher than under equal-sharing, and lower when a promotion incentive is absent. This research provides a cost-neutral incentive design practical for organizations facing budget constraints.