Employees motivation and high performance workplace practices

Annalisa Cristini

University of Bergamo October 2011

This is a very revised version of a paper I wrote during my sabbatical year at the Department of Economics and Nueld College, Oxford. I wish to thank Steve Nickell for extensive discussions and many important insights. I also thank Duncan Gallie, Ken Mayhew, Ying Zhou, the participants to the Oxford Economics Department seminar (May 2007) and J orn-Steen Pischke for comments on a previous version of the paper. The usual caveats apply. Research grants from the University of Bergamo are acknowledged. Contact address: Department of Economics, University of Bergamo, Via dei Caniana 2, 24127 Bergamo, Italy. Email: annalisa.cristini@unibg.it. Tel.: +39 035 2052 549; Fax: +39 035 2052549.

Abstract Existing evidence shows that employees motivation usually improves in presence of innovative workplace practices. This paper examines whether this result is ascribable to a higher intrinsic motivation, which grants a higher eort for a given remuneration and job quality, or to a higher extrinsic motivation. A simple model of organizational commitment is suggested to help identify the channels through which innovative practices aect motivation. The model is estimated on a nationally representative sample of Italian employees. Results show that practices providing substantial empowerment are powerful intrinsic motivators: for given pay and working conditions, they strengthen employees attachment to the rm and identication with its values. In contrast, innovative practices bear only marginally on the extrinsic motivation; moreover, pecuniary rewards are negative reinforcers when contingent on performance; nally, the relative wage can aect employees attachment to the rm but not their sense of belonging.

JEL Classications: J28 J33 J53 M54

Keywords: High Performance Workplace Practices, Motivation, Commitment, Wages, Working conditions.

Introduction

More than forty years ago Leibenstein (1966, p.413) argued that for a variety of reasons people and organizations normally work neither as hard nor as eectively as they could and regarded motivation to be a major determinant of X-eciency. Since Leibensteins work, the debate about what motivates real people in real organizations (Simon, 1991) unfolded along the idea that peoples management should hinge on commitment rather than control (Walton, 1985) and contributed to the emergence of innovative work systems and management practices1 aimed at enhancing employees commitment through substantial involvement and empowerment (Osterman, 1994 and 2000, European Commission, 2002). This general view attracted a considerable attention and is now supported by a pretty sound evidence2 ; by contrast, the more specic question of whether the new management practices bear on employees extrinsic or the intrinsic motivation has not been investigated; yet, it is immediately relevant to the rm costs: The case in which employees involved in the new system exert a higher eort only to the extent that they share, in the form of higher monetary rewards, the productivity gains engendered through their involvement3 , is quite dierent from the case in which involved employees are more willing to work simply for the works sake. In the former case innovative practices can be regarded as ultimately extrinsic motivators; in the latter one
Innovative work systems are usually characterized by so-called High Performance Workplace Practices (HPWP), which typically include: self managed teams, job rotation, formal arrangements aimed to openly discuss production problems, suggestions schemes, performance related pay and information sharing; in some cases hiring procedures and training are also considered. See for example Pfeer (2007). 2 Freeman and Kleiner (2000) show that employees participating in employee involvement programs (like total quality management, opinion surveys, information sharing, committee on productivity, worker involvement in the design of employee involvement programs, worker involvement in work processes, self managed teams) report higher trust and loyalty to the rm and higher work satisfaction than non-involved employees. Godard (2001), using a sample of Canadian workers, nds that job satisfaction, commitment and motivation are all positively related to an indicator of new workplace practices although he also nds that work intensication can in same cases osets the benets. In another Canadian matched employer-employee dataset Mohr and Zoghi (2008) nd that innovative practices (suggestion schemes, task teamworking, job rotation, quality circles, information sharing, self directed work-group and class training) are all positively related to job satisfaction. For Europe, Bauer (2003) nds that the degree of job autonomy (regarding tasks order, methods of work, job speed and quality) and the extent of information sharing (horizontal and vertical communication) drive the positive relation between HPWP and job satisfaction. However, for Britain, using WERS 2004, Guest and Conway (2007) fail to nd any signicant association between employees organizational commitment and a bundle of innovative human resource management practices. Guest (1999) provides a discussion of how employees fare in presence of innovative practices. 3 The positive role of innovative practices on rm productivity has, on the whole, a sound empirical support; see for example: Ichniowski, Shaw and Prennushi (1997) and Black and Lynch (2004) for the USA, Wood and De Menezes (1998), Bryson et al (2005) and Patterson et al. (1997) for the UK, Bauer (2003) and Zwick (2004) for Germany, Greenan (1996) and Caroli and Van Reenen (2001) for France, Kato and Morishima (2002) for Japan; Cristini, Gaj and Leoni (2003) for Italy. Less clear-cut results are found on the role of innovative practices on the wage: these are discussed below in the text.
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they are genuinely intrinsic motivators (Frey, 1987; Frey and Jegen, 2011; Benabou and Tirole, 2003). There are at least two further reasons why this distinction is likely to be relevant. The rst one rests on the so called hidden costs of rewards (Lepper and Greene, 1978; Deci and Ryan, 1985): external interventions, particularly in the form of contingent pecuniary rewards may be negative reinforcers, thus can partially or totally crowd out ones intrinsic motivation. This result, long known in cognitive psychology, has been recently derived by Benabou and Tirole (2003) within an extended principal agent models where asymmetric information between the principal and the agent is the conditio sine qua non for this eect to arise.4 . The second reason is that, even in absence of crowding out eects, extrinsic and intrinsic motivations normally relate to dierent work attitudes and behaviors: according to a well known psychological view initiated by Etzioni (1971) the remunerative power of the organization, not only may undermine intrinsic motivation, but can also buy only a calculative type of commitment. This paper suggests an analytical framework to distinguish between the sources of work motivation induced by innovative workplace practices and derive the theoretical conditions for the optimal amount of organizational commitment to rise in presence of such practices. A corresponding empirical model is estimated using a nationally representative sample of 3605 Italian employees working in the private sector. Results show that the theoretical conditions are easily satised for some but not all innovative practices and that these practices are essentially intrinsic motivators. The relative wage is found to have a narrower scope than the best innovative practices as it helps retaining workers but dont get to their sense of belonging; furthermore, the evidence shows that pecuniary rewards, if contingent on performance, can even reduce the rm attachment by backring on employees intrinsic motivation. These crowding out eects are found to be related to the workers educational attainments and are interpreted along the theoretical notion of sorting condition (Benabou and Tirole, 2003). The rest of the paper is organized as follows: the next section introduces the theoretical set up; section 3 describes the data, section 4 illustrates the empirical model and the estimation strategy, section 5 discusses the econometric results and the last section concludes.
Various work situations where external interventions are likely to undermine intrinsic motivation are discussed by Frey (1997) and a survey of the evidence is reviewed in Frey and Jegen (2001); crowding out eects within labour relationships are supported by laboratory and eld experiments (Gneezy and Rustichini, 2000; Fehr and Schmidt, 2000) and by some econometric evidence based on survey and case studies (Jordan, 1986; Barkema, 1995; Minkler 2004).
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The model

Each employee chooses her amount of commitment in order to maximize the net benet, where the benet and cost functions are respectively concave and convex in commitment: B > 0, B < 0 and C > 0, C > 0 (Frey, 1997). The marginal benet is assumed to be positively related to the employees intrinsic motivation () and relative wage5 (w) while the marginal cost declines with the quality of the working conditions (d). If the benet and cost functions are quadratic in and linear in the parameters, the marginal functions can be expressed as follows: B = [ + (1 )w] c1 C = b3 d + c2 (1) (2)

where c1 , c2 , b3 are positive parameters and (0 < < 1) captures the importance that the employee attaches to her intrinsic motivation, relative to her wage, in the marginal benet. We argue that innovative practices can aect the determinants of the marginal benet and the marginal cost. First of all, they are expected to enhance intrinsic motivation to the extent that they substantially empower employees (Benabou and Tirole (2003), enhance their rm identity (Akerlof e Kranton (2005))6 , increase workers interest in their their tasks, strengthen personal interactions at work and involve employees in rms decisions (Frey (1997)). By contrast, contingent rewards, if part of the innovative system, undermine intrinsic motivation as long as employees perceive them as a means of control (Etzioni, 1971; Frey, 1997) or as negative signals of the task attractiveness or of their own ability (Benabau and Tirole, 2003). Innovative practices might further aect the marginal benet through the wage. In presence of wage bargaining, the productivity gains engendered by adopting innovative practices will be distributed to employees salaries in proportion to the unions bargaining power; were bargaining not relevant, the average wage could still rise in presence of productivity gains to the extent that the employer unilaterally decides to do so on the basis of fairness or other eciency wage conThe reference wage is thought to be the peer groups wage; it will be specied in in the empirical section. Benabou and Tirole (2003) use a generalized principal agent model and show that empowerment, if taken to indicate a positive judgment on the employees ability on the part of the principal, can change employees attitudes permanently. In a similar vein, Akerlof e Kranton (2005) show that the employees work eort rises, for given monetary incentives, when employees identity aligns with the rms goals and values.
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siderations (Akerlof, 1982; Nickell, 1996). Moreover, innovative practices might enhance human capital (Caroli and Van Reenen, 2001; Bresnahan et al., 2002) bringing about skills upgrading and consequent wage increases; nally, innovative practices might give rise to amenities or disamenities and the wage could partly or totally compensate for them. Because of these partly contrasting forces the link between innovative practices and the wage may be weak and indeed the existing evidence is overall inconclusive.7 . Turning to the marginal cost of commitment, a strand of the health literature nds that some innovative practices are associated with a deterioration of working conditions due to increasing risks of injuries and occupational illnesses8 , to higher rates of anxiety and work intensity and to a reduced job security.9 . Other scholars have stressed, on the contrary, that job autonomy, discretion and reduced supervision which ensue from empowerment and involvement, enrich the job content, are highly appreciated by the workers and highly compensated as amenities (Clark, 2004 Helliwell and Huang, 2005). A priori, the sign of the relation between working conditions and innovative practices is therefore ambiguous.
This is also the conclusion of Handel and Levine (2004)s survey. Handel and Gittelman (2004), on a sample of 1062 US establishments from the 1995 Survey of Employer-Provided Training, nd no signicant impact of HPWP on either the average establishment wage or the individual wage. Osterman (2000), on a sample of about 300 US establishments in the private sector, nds that core workers employed in rms that introduced HPWP four years before, enjoy no signicant wage gains. Cappelli and Neumark (2001), on the subsample of rms present since 1977 in the Education Quality of the Workforce National Employer Survey (EQW NES) US panel, nd a positive and signicant relationship between practices and labour cost. Black, Lynch and Krivelyova (2004), on the subsample of all manufacturing rms in the EQW NES also nd a positive association between wages and the practices of meetings and prot sharing, but only when practices are interacted with the union dummy. Osterman (2006) nds a positive impact of a principal component indicator of HPWP on the level of the median wage of core non-manager employees. Godard (2007), using Canadian and English data, nds that the combination of union representation and best practices yields relatively higher wages although high performance practices are strongly associated with non-union workers wages. 8 Askenazy (2001) uses a panel of 26 US sectors over four quinquennia from 1979 to 1991 and nds that total quality management, job rotation and autonomous work teams are related to greater occupational injuries and illnesses. Farris and Brenner (2001) and Brenner et al. (2004) combine the 1993 US Survey of Employer Provided Training with the 1993 Survey on Occupational Injuries and Illnesses and nd that total quality management and the interaction of total quality management and teamwork raises cumulative trauma disorders; the suspicion that total quality management represents a new form of taylorism is also raised by Adler et al., (1997). More recently, Askenazi and Caroli (2006) using a representative sample of French workers nd quality norms and job rotation to be associated with higher number of injuries and mental strain. Mohr and Zoghi (2008) use Canadian data and nd that quality circles rise the desire to work less hours due to stress but do not nd a direct relation between days of work lost and HPWP. 9 According to Gallie and Green (2002) UK skilled workers and workers upskilling are characterized by mounting anxiety, and Green (2004) associates work intensication to the new workplace. Osterman (2000) nds that as new work systems may lead to thorough reorganizations and layos, job security is also jeopardized. According to Black et al. (2004, Table 7) the probability of experiencing a 20% or more employment reduction is positively associated with an intensive use of self managed teams and job rotation by non managerial workers although the results are attenuated in unionized establishments.
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Taking stock of the above discussion, we model the following system of linear equations: d = f ( |z ) w = g (, d|z ) = c1 [( ) + (1 )w + b3 d] (3) (4) (5)

where z is a vector of exogenous variables (typically, the employees personal characteristics), f () and g () are monotonic functions, equation (5) is derived from equating the marginal cost and the marginal benet of commitment, c = c1 + c2 > 0 captures the curvatures of the benet and cost functions and summarizes preferences. Optimal commitment rises with involvement if the following holds: dw d + (1 ) + b3 >0 d (6)

where dw/d = w/ + w/d d/ . The condition is determined by three components: the eect of innovative practices on the intrinsic motivation ( / ), on the relative wage ((1 ) dw/d ) and on the working conditions (b3 d/ ). The empirical values of these three components are estimated in section 4 and innovative practices will be classied accordingly. The above inequality is always satised if dw/d 0, / > 0 and d/ > 0 and never satised if dw/d 0, / < 0 and d/ < 0. The relative weight of the intrinsic motivation matters, however, when the three components have opposite signs. Table 11 in the appendix derives the values of for which the condition holds: as the eects of the practices on the wage and on working conditions decline and become negative, must rise if / > 0 and decline if / < 0.

The data

The data used to estimate the model are taken from the survey OAC (Organizzazione, Apprendimento e Competenze which translates as Organization, Learning and Competencies) designed by ISFOL (Institute for the Development of Workers Training, a public think tank based in Rome) on the basis of Skills in Britain (Felstead et al., 2002) and addressed in 2004

to a nationally representative sample of 4000 Italian employees working in the private sector (ISFOL, 2007; Tomassini, 2006).10 . The survey was carried out in collaboration with the Italian Statistical Institute and its statistical structure was based on the Italian Labour Force Survey. Employees were rst contacted and then interviewed at home using CAPI; net of errors and invalid strings, 3605 observations were nally made available11 . The detailed information that the survey provides on employees involvement in innovative practices, on the content of their jobs, on working conditions, on the presence of contingent premia, on the average wage, together with numerous individual and rm characteristics, makes it a very useful dataset for this empirical analysis. Organizational commitment is measured on the basis of a standard set of statements on which the employee is asked to agree or disagree using a Likert scale12 : (i) This organization really inspires the very best in me in the way of job performance; (ii) I am proud to be working for this organization; (iii) I nd that my values and the organizations values are very similar; (iv) I feel very little loyalty to this organization; (v) I am willing to work harder than I have to in order to help this organization succeed; (vi) I would take almost any job to keep working for this organization; (vii) I would turn down another job with more pay in order to stay with this organization. In order to test for potential dierent eect of extrinsic and intrinsic motivation, I distinguish between two types or dimensions of commitment: a dimension reecting sharing of values and rm identication, captured by items (i)-(v), and a dimension of rm attachment, captured by items (vi)-(vii), characterized by a relatively stronger sense of commitment revealed by the fact that the employee is ready to bear a cost to stay with the organization, implicit either in the acceptance of any job or in the refusal of a better outside job oer. For convenience I call the two components value and strong commitment and will be used as alternative measures of .13 .
http://www.isfol.it/Banche Dati/Organizzazione apprendimento e competenze (Oac)/index.scm Because of problems related to eligibility details and low response rates required the conduct of some extra interviews; the validation procedure discarded any bias between the two parts of the survey (ISFOL (2007), chapter 1). 12 The statements are a subset of the most frequently used Mowdays Organizational Commitment Questionnaire (Mowday et al. 1979) and are the same used in by Gallie et al. (1998) for Britain. The Likert scale is: Totally disagree (1), Strongly disagree (2), Disagree (3),Indierent (4), Fairly agree (5), Strongly agree (6), Totally agree (7). 13 Gallie et al. (1998, p.238) comment that items (vi) and (vii) express a willingness to be exible to the point of some personal sacrice, and can be regarded as particularly strong expressions of commitment (while) the remaining (items) are rather weaker expressions of identication with the organization and its values. See also Godard (2001) for an equivalent distinction. Both measures are computed by summing the relevant items, after reversing the scales of statement (iv), and then rescaling the indicators into 7 categories. The dierent skewness of
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Employees involvement in innovative practices is measured by a vector of dummy variables on the basis of employees answers to the following specic questions: Do you take part in quality circles? (qc); Do you participate in periodic employer-employee meetings? (meet); In the last 12 months have you made any suggestions to colleagues or heads aimed at improving eciency in your work? (suggest); Has your company received any quality certication? (quality); Do you work in team? (team); Is your team autonomous in task-related issues? (task)14 ; Is your team responsible for the output or service produced? (resp); Is your team autonomous in matters regarding the team members? (group)15 . On the basis of these information, lean teams (team is true but none of task, resp and group is true) is distinguished from various types of sociotechnological teams characterized according to the extent and types of autonomy.16 . In particular, when team, task, resp and group are all true, the team is fully autonomous and the denition is very close to the one used by Cullie et al. (1999) and Harley (2001); however, the approach used in this paper also allows one to detect intermediate cases where only some of the autonomy dimensions may be present. With regard to contingent rewards, we know whether the employee has received monetary premia on the basis of her performance. Specically, two are the relevant questions: Have you been formally appraised at work in the last twelve months and do these appraisals aect your earnings in any way?
the two densities (not shown) conrm that it is relatively easier to be value-committed than strongly-committed. Results are qualitative similar but not as clear cut, if item (v) is included in the strong commitment denition rather in the value commitment one. Alternative composite indicators based on the number of statements the respondent agrees with, show distributions far away from the normal and were not used. 14 Either one of these two item must be true: a) The team members together decide how to do the work; b) The team members together decide which other tasks to do. 15 Either one of these three items must be true: a) The team members together propose the team leader to the management; b) The team members together decide the team leader; c) The team members together decide about matters regarding new team members. 16 Autonomous or self managed teamworking origins in the Swedish-inspired sociotechnical team which, in contrast to the Japanese-inspired lean team, enjoys a signicant degree of autonomy; although regarded as a crucial practice in the new work systems (Benders and Van Hootegem, 1999) the minimum discretion that a team must enjoy in order to be classied as autonomous varies in the literature; for example, Cullie et al. (1999) and Harley (2001), both using UK WERS, dene autonomous teams as those in which members work with one another and have responsibility for specic product or service and jointly decide how work is to be done or as those in which members work with one another and have responsibility for specic product or service and jointly decide how work is to be done and appoint their own team leaders. Scholars using EPOC (Benders et al., 2001) or similar surveys (Steijn, 2001) dene a team to be autonomous if it has decision rights on at least 4 or 5 out of 8 activities; these are: allocation of work, scheduling of work, quality of work, time keeping, attendance and absence control, job rotation, coordination of work with other internal groups, improving work processes. Batt (2004) studies a case where self managed teams are those that assume supervisory tasks including: setting daily assignments, writing up reports, covering breaks and schedules, handling non-routine problems, and calling directly on subject matter experts as needed. As it is clear from the longstanding sociological debate on self managed teamworking, the diculty of an exact denition reects the eclectic implementation of this concept in the real workplace (Steijn, 2001); then, in designing an empirically viable denition, it is important to retain a sucient exibility.

(earn); As a team member, do you receive monetary rewards based on the team performance? (teampay). A further question regards contingent training: Have you been formally appraised at work in the last twelve months and do these appraisals aect the amount of training you receive? (train), which could also be regarded as a performance-related external intervention. On the whole, is composed of eleven dummy variables. Finally, the overall quality of working conditions as perceived by the employees is measured by a set of categorical variables; three of them regard physical working conditions: i. Frequency of exposure to serious accidents (accidents); ii. Frequency of exhaustion from work (exhaustion); iii. Eort intensity (eort intensity). Four variables concern the job content: iv. Strictness of supervisors control (supervision); v. Job repetitiveness (repetitiveness); vi. Job discretion (discretion); vii. Job autonomy on timing and eort (autonomy)17 and a nal variable regards job security: viii. Probability of unemployment over the next 12 months (unemployment). The vector d is therefore composed of these eight variables which vary on a 1-7 Likert scale, from low to high.

3.1

Innovative practices and employees commitment: descriptive evidence

Column 1 in Table 1 ranks workplace practices in descending order of frequency. Over 70% of employees have given some suggestions in the last 12 months, and almost 60% take part in joint meetings; nearly half of the employees work in teams but only 38% are members of teams with autonomy on tasks and procedures18 ; a third of employees work in teams that are held responsible for the output produced and a somewhat lower percentage of workers have some autonomy in matters regarding the team leader and new members. Contingent monetary rewards are not very common: earnings linked to individual performance assessments involve 13% of employees while team performance related pay involves 8% of employees; training contingent on individual assessments involves 10% of employees. Columns 2-5 of Table 1 report the ranking of the practices by employees levels of education. With the exception of lean teams, the data conrm that the frequency of involvement rises with employees educational attainment. This point will be further discussed in section 5.2.
17 The latter is obtained by summing the scores of three types of job autonomy: job autonomy on timing and eort, job autonomy on tasks and their sequence and job autonomy on how to do the task. The total score is then re-scaled to 1-7. 18 As shown in Table 7 in the Appendix, 22% of all employees work in teams; of these, 48% are members of fully autonomous teams, 14% work in task-autonomous teams, 12% work in task-autonomous-output-responsible teams and 11% work in lean teams.

Descriptive evidence supports the view that employees involved in new workplace practices are relatively more committed to their organization than employees not involved (Table 2); the former report signicantly higher scores in loyalty, pride of belonging to the company, share of values and readiness to work harder for the organizations success. Employees using suggestion schemes and taking part in joint meetings and QC are also more likely to forgo a better paid job to stay with the organization but no innovative practice signicantly increases employees willingness to take up any job to stay with the rm. As already found by Freeman and Kleiner (2000) on US data, employees working in teams report higher scores in loyalty and willingness to work harder; however, employees working in lean teams are signicantly less inspired by the organization and less in line with its values with respect to the other employees while those working in task autonomous teams are relatively prouder of being part of their organization. Contingent rewards are positively associated with employees pride, loyalty and eort but only employees individually appraised declare to be relatively more inspired by the organization and share its values. On the whole, being involved in the new practices appears to make a dierence more for value than for strong commitment: signicantly higher scores in the latter are associated only with joint meetings while relatively higher scores in the former are also associated with suggestion schemes, task autonomous teamworking, contingent training and contingent monetary rewards. The relationships just described, being unconditional, could merely capture spurious correlations; for example, if larger rms are relatively more likely to adopt innovative practice and can also pay relatively higher wages that motivate their workforce, the relation between employees commitment and workplace practices would simply capture the role of rm size. The next section then turns to the multivariate analysis.

Empirical model

By drawing from the theoretical analysis, the empirical model is specied as a linear system of equations: d = A1 + z + u1 w = 2 + 2 d + 2 z + u 2 = 3 + 3 d + 3 w + 3 z + u3 10 (7) (8) (9)

where d is the vector of categorical variables capturing the quality of the employees working conditions, w is the log of the monthly take home relative wage, is either one of the two measures of organizational commitment dened in the previous section, is the vector of dummies capturing employees involvement in innovative practices, z is the vector of controls.19 . Both z and 20 are assumed uncorrelated with the error terms u1 , u2 , u3 . A1 and 1 are matrices of coecients and the remaining symbols are row vectors of coecients. Notice that by confronting equation (9) to the corresponding theoretical equation (5), 3 = (1 )c1 . Hence, as long a c1 is constant across the two dierent measures of commitment, which is the case if the employees preferences underlying her benet and the cost functions of commitment are constant, the empirical 3 estimated for strong and value commitment are informative on the magnitude of across the two types commitment. Again, by confronting the empirical and the theoretical model, for each practice 3 = ( )c1 which, given the above argument can be informative on the role of innovative practices on employees intrinsic motivation, in the two types of commitment.

4.1

Identication and estimation strategy

The system (7)-(9) is recursive; a useful approach for its identication would be to make it fully recursive using covariance restrictions, thus avoiding the more common alternative of exclusion restrictions: under full recursiveness the error covariance matrix is diagonal, all equations are identied and OLS estimates are unbiased (Wooldridge, 2001). However, in this specic case, the covariance matrix is unlikely to be diagonal because of common components in the error terms. In particular, one should consider the possibility that the sorting of employees into new work systems may not be random but related, for example, to some unobservable psychological traits or family characteristics, or to the employees unobservable ability. The latter possibility is of particular interest as existing results (Caroli and Van Reneen, 2001 and Bresnahan et al., 2002) show that new workplace practices complement with high skill workers. In this case, if controls in the regression only partially capture workers heterogeneity in cognitive and non cognitive ability (Heckman et al., 2006), a self selection problem may arise. Specically, if more
Individual controls used in the empirical model include: ID, familiar status, children, education, skill level, experience, tenure, occupation, region of residence and others. Firm controls include: size, sector, region, union presence. See Table13 for the complete list of controls. 20 In a more general framework workplace practices could be regarded as a choice variable on the part of the employer. Empirical evidence on the determinants of the adoption of innovative practices by the rm see Lynch (2007), Osterman (1994), Wei, Freeman and Keliner (2011).
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able workers were more likely to be involved in innovative practices and wages and ability were also positively correlated, the coecients of workplace practices in the wage equation would be upward biased21 ; likewise, if ability and commitment were related, for instance because more able workers were ceteris paribus less strongly committed to the rm because they can count on broader outside opportunities, then the coecients of both workplace practices and the wage in the commitment regression would be downward biased. Therefore, let each error term be the sum of two components: i and is where is is a pure error unrelated across equations and i is a component common to all equations capturing unobservable individual characteristics; full recursiveness is then satised only if i is adequately instrumented. In order to do this, I follow van Praag et al. (2003) and use the rst principal component of the estimated residuals from the subsystem of equations (7) to instrument the common component in equations (8) and (9). Since d is a vector of qualitative categorical variables, in order to allow for correlation across errors of subsystem (7), I rst transform the ordinal dependent variables into discrete variables ranging on the real axis as suggested by Terza (1987)22 and then apply Zellners seemingly unrelated estimator. Finally, using factor analysis, I compute the rst principal component of the SUR error covariance matrix and use it as an additional regressor in equations (8) and (9); the wage and commitment equations can then be estimated separately by OLS and ordered probit, respectively. This procedure takes care of the endogeneity bias in the wage and commitment equations. Notice that in the wage and commitment regressions, the use of the Terza-transformed job attributes in place of the original ordinal variables avoids including, for each job attribute, a number of dummies equals to the number of categories minus 1, thus also helping the interpretation of the results.

In the wage equation unobserved ability is also expected to bias the coecients of job attributes: if more able workers use their endowment to obtain both a better quality job and a higher wage, then the price of job amenities will be downward biased (Hwang, Reed and Hubbard, 1992; Helliwell and Huang, 2005). 22 Terza (1987)s suggested transformation replaces each category j of an ordinal variable by j where j = E (j |j 1 < j j ) and j are the (maximum likelihood) normal quintile values of the percentages of the sample observed in category j . See also van Praag et al., 2003 for similar considerations.

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Results

Tables 3 and 4 present the estimated model. The SUR estimates23 of the sub-system (7) are reported in Table 3; they show the extent to which innovative practices are related to the quality of the employees working conditions. It turns out that innovative practices dier substantially in this respect. Being involved in joint meetings and using suggestions is positively related to job autonomy and discretion and negatively to job repetitiveness; joint meetings are also negatively associated with the strictness of supervision, with eort intensity and exhaustion, thus resulting as the practice that most of all is associated with good job quality. The teams latitudes in deciding tasks and managing the group also imply greater empowerment although the extent of job autonomy declines when teams are responsible for the output produced; likewise, strictness of supervision, eort intensity and exhaustion all increase when teams self direct the group, hinting to the presence of adverse peers pressure eects (Barker, 1993; Adler et al., 1997; Harley 2001) and casting some doubts on the overall job enrichment of fully autonomous teams.24 . The existing evidence according to which risks of injuries and occupational illnesses increase with some innovative practices is conrmed only for contingent monetary rewards (earn) which are positively related to both eort intensity and the perceived frequency of accidents. Lean teams (team) are also associated with poor intrinsic job content and with exhaustion and, similarly, QC are positively related to exhaustion, intensity of eort, repetitiveness and reduced autonomy; neither practice, however, is signicantly associated with the perceived risk of injuries. Finally, supervision, eort intensity and exhaustion are lower when rms comply with quality norms but the employees job autonomy is only marginally higher in this case. Table 4 reports the estimated wage and commitment equations. All regressions control for the common error component, suitably instrumented as previously discussed. The relative wage25 , in column (1), is unrelated to most empowerment practices, the exceptions are task autonomous
All estimations are weighted using the population weight provided in the dataset, ISFOL(2007). On the whole, being member of a fully self managed team does not mean greater job autonomy: the sum of the coecients of team, task, group, resp and teampay is not statistically dierent from zero; the validity of the implicit assumption of negligible interaction eects is conrmed by including a dummy for fully autonomous teams in the regressions. 25 Following Clark and Oswald (1996), the log of the relative wage is dened as the dierence between the individual log wage and a reference log wage dened as the tted values of the log wage on the following variables and controls: monthly hours of work, age, age squared, years of experience, years of tenure, education dummies, fulltime job dummy, permanent job dummy, skill level dummies, gender dummy, dummy for workplace located in the south, pension fund dummy, rm size dummies, region dummies, sector dummies, organizational are dummies, occupational dummies; see appendix for more details on the controls. On the concept of relative wage, its relevance and its measurement see for example Clark and Oswald (1996).
24 23

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teamworking which rises the relative wage by 6% and output responsible teamworking which lowers it by 4.5%; fully self directed teams are eventually unrelated to the relative wage26 . Contingent rewards signicantly add to the wage only if monetized on the basis of individual appraisals (earn): in this case the relative wage rises by 9%; on the contrary, the relative wage declines by more than 3% when monetary rewards are based on the team performance or when individual appraisals are used for training purposes (train). Columns (2)-(5) show the commitment ordered probit estimates and the marginal eects of the practices computed for the second largest category (category 6). Since the relative wage and working conditions are controlled for, the estimated coecient of each innovative practice is indicative of the relevance of the latter on employees intrinsic motivation. Task autonomous teamworking, joint meetings and QC enhance the intrinsic motivation of both value and strong commitment; suggestions schemes have some positive relevance only for value commitment. On the contrary, lean teams, output responsible teams and quality norms depress employees intrinsic motivation. The estimated coecient for the relative wage, which is positive and statistically signicant only for strong commitment, suggests that , relative weight of intrinsic motivation in the employees marginal benet, is low when at stake is the decision of staying with the organization and high when matters concern alignment with the rms values. Also contingent pecuniary rewards bear only on strong commitment but they signicantly crowd out intrinsic motivation: the probability of a high strong commitment (category 6) declines by 1.3% if employees are individually appraised and by 2.1% if they receive a team performance-related pay. These ndings nicely accord with the psychological view according to which the remunerative power of the organization can buy only a calculative type of commitment and may have potentially negative eects on the intrinsic motivation (Etzioni, 1971). In order to obtain the overall impact of each innovative practice on commitment and determine d /d , the indirect eects of the practices channeled to commitment via the wage and the working conditions, need also be considered. This is done in the next section.

The linear restriction (TEAM+TASK+GROUP+RESP=0) is not rejected by the data: F (1, 2889) = 0.16, P rob F = 0.69.

26

14

5.1

Disentangling the motivational channels

In order to quantify the indirect eects of the practices, I estimate the reduced forms obtained from equation (9) after substituting for working conditions, for the relative wage and for both. i = (3 + 3 A1 )i + 3 wi + (3 + 3 1 )zi + u3i + 3 u1i i = (3 + 3 2 )i + (3 + 3 2 )di + (3 + 3 2 )zi + u3i + 3 u2i i = (3 + 3 2 + 3 2 A1 + 3 A1 )i + (3 + 3 2 + 3 1 + 3 2 1 )zi + u where u = u3i + 3 u2i + 3 u1i + 3 2 u1i The marginal eects of computed from these reduced forms, compared with the marginal eect obtained from equation (9), allow to distinguish the overall eect of each practice on commitment into its three components: the intrinsic motivation eect 3 , the total wage eect 3 2 + 3 2 A1 and the working conditions eect 3 A1 . The three components and the total eects are shown in Table 5. Notice that the marginal eects, again computed for category 6, are normalized to the frequency of the category in order to be able to compare the role of each practice on the two types of commitment which have dierent frequencies in the category of interest (29.6% for value commitment and 7.2% for strong commitment). The ordered probit estimates and the marginal eects are reported in Tables (8) and (9) in the Appendix. In Table 5 practices are ranked in descending order with respect to their overall normalized marginal eects, and for ease of interpretation results for teamworking are presented by type of teams. d /d is positive for all empowerment practices except for the two extreme types of teamworking: lean teams and fully self-managed teams and, limited to value commitment, for quality norms. Receiving any type of contingent reward reduces strong commitment while only contingent team premia reduce value commitment. With a few exceptions, the eect of the practices on the intrinsic motivation drives the overall eect thus conrming that this is the main channel activated by the innovative practices. The largest eects on the intrinsic motivation are found on strong commitment and are conveyed by task autonomous teamworking, joint meeting and QC which rise the probability of a high score by almost 50%. The same practices are also the most eective ones on the intrinsic motivation of value commitment but their strength is comparatively lower in this case, rising the probability of a high score by 20% at most. If, as argued (10) (11) (12)

15

before, is smaller in strong commitment than in value commitment, these results suggest that / is relatively higher in strong commitment. The indirect eects, either through the wage or the working conditions, are generally much smaller in size. In particular, the indirect eects working through the job quality are mostly negative on value commitment, a result driven in large part by the negative association between team and working conditions and play only a marginal role on strong commitment. The indirect eects conveyed by the wage partly counterbalance the intrinsic motivation eects on strong commitment, and are again mostly negative while on value commitment they tend to reinforce intrinsic motivation; in both cases they are relatively small. Team performance related rewards reduce the probability of a high score in strong commitment by 40%, thus ranking as the worst practice; a less disruptive role of contingent rewards is evident only when they are based on individual appraisals. This result, consistent with the idea that employees morale might be particularly penalized when the individual eort cannot be explicitly acknowledged, is further explored in the next section. Table 12 in the appendix summarizes the results in a schematic way by classifying the practices according to the signs of the three components determining the inequality (6) derived in section 2.

5.2

A further look at crowding out eects: commitment by education

In Benabou and Tirole (2003) crowding out eects are rationalized by the presence of asymmetric information and the corresponding signal perceived by the less informed employee; specically, crowding out eects emerge when the principal has some information about the task or about the worker himself that the worker does not have, and the principals gain from such a superior information (the so-called sorting condition ) is a bad news for the employee. When the signal is, instead, favorable to the employee, the sorting condition works in the opposite direction and the nal outcome is one of crowding in. Similarly, Frey (1997) and Frey and Jegen (2001) argue that crowding out eects depend on the workers perception about the employers external intervention; when it is regarded as controlling, crowding out eects are likely to arise; on the contrary, when it is perceived as informative, crowding out eects do not arise or crowding in may take place. The employees perception about the intervention is therefore a key element in Frey (1997) as in Benabou and Tirole (2005).

16

The commitment regressions presented in section 5 give credit to the idea that the contingency of a reward and its monetization are relevant for crowding out to emerge and that the degree of crowding out rises when rewards disregard individual eorts. In what follows the role of the employees perception about the reward is further investigated. The basic assumption is that simple and standard tasks should in principal be paid standard rewards; a contingent pay in this case would then be regarded as a signal of some bad attributes of the task, of which workers are not informed, or as a controlling device. On the contrary, for more complex and distinctive tasks a performance related pay should be perceived as being informative of the employees eort more than controlling. Thus, ceteris paribus, crowding out eects should be more likely when contingent rewards are used to remunerate standard tasks and less likely when associated with non standard jobs. In order to test this suggestion, the degree of standardization of a task is supposed to be inversely related to the employees educational attainment: the more standard tasks are expected to be performed by the less educated workers, and the less standard tasks are expected to be performed by the more educated workers. Specically, I consider four levels of schooling: compulsory, vocational secondary (i.e. from 1 to 3 years of post-compulsory school), technical secondary (i.e. 5 years of post compulsory school) and tertiary (i.e. undergraduate and graduate degrees) and I estimate the basic commitment regressions for each of them.27 . Results are reported in Table 6. Crowding out eects are observed for workers with compulsory schooling; since tasks, in this case, are expected to be relatively standard, results support the view that contingent rewards are perceived as a means of external control. However, since crowding out eects are strongly associated with team-performance related rewards (teampay), one could also argue that the type of reward per se is a negative reinforcer because of its monitoring role and its likely uniformity across team members. Crowding out eects, however, do not apply when the same reward is used for higher educated workers, thus indicating that they cannot be related to the type of reward per se. Likewise, crowding in eects emerge when contingent rewards based on individual appraisals are used for tertiary educated employees but the same type of reward produces crowding out eects when used for less educated employees, again suggesting that the sorting condition is favorable to highly educated workers. Non pecuniary contingent rewards (train) also crowd out motivation when applied to low educated workers,
Regressions by type of schooling are equivalent to saturating the previous model by allowing each regressor to have a dierent coecient depending on the education attainment of the employee.
27

17

presumably signalling bad task attributes. All these results accord with a use of contingent rewards that rises with employees years of schooling, as observed in the descriptive statistics (Table 1). These regressions further conrm that the relative wage is a powerful motivator for compulsory and vocational skill groups to remain attached to the rm but it is ineective on the value commitment across all educational groups; again, for given preferences, this implies that rises with education, a result that accords with other ndings for manual workers (see Lane, 1991 chapter 19, cited in Frey, 1997).

Conclusions

Innovative workplace practices are usually associated with high employees morale. This paper has examined whether the higher organizational commitment associated with innovative workplace practices is ascribable to a higher intrinsic motivation, which grants a higher eort for a given remuneration and job quality, or to a higher extrinsic motivation, basically driven by a higher pay. The question has been tackled using a simple model according to which employees choose organizational commitment in an optimal way by equating the marginal benet and the marginal cost of eort where the marginal benet from commitment is a weighted average of intrinsic motivation and the relative wage, and the marginal cost depends on the working conditions. Innovative practices may change the marginal benet by aecting employees intrinsic motivation and/or by allowing higher pecuniary rewards, and may change the marginal cost of eort by aecting the job quality. Results show that empowerment practices that allow a substantial empowerment in terms of greater job autonomy, greater discretion, reduced supervision and reduced repetitiveness, can enhance both the sense of belonging and the attachment to the organization. Such practices, like joint meetings and teamworking with latitude on tasks and procedures, aect commitment mostly directly, that is by reinforcing employees intrinsic motivation, whereas their indirect eects, which inuence commitment through the wage and the job quality, are comparatively smaller. Results also show that employees tend to attach a relative low weight to intrinsic motivation 18

in their marginal benet functions, when they are concerned with decisions regarding their attachment to the organization and a relatively high weight when considering their identication with the rms values. Findings also indicate that the weight attached to intrinsic motivation rises with employees educational attainment. Contrary to the best empowerment practices, the relative wage helps retaining employees but cannot aect their value commitment; moreover, pecuniary rewards if contingent on performance, signicantly crowd out intrinsic motivation, in accordance with existing experimental results. These eects are particularly harmful on employees attachment to the rm and are only partly compensated by the wage when rewards are contingent on the individual performance. A deeper investigation into the crowding out eects supports the view that whether a contingent reward determines crowding out or crowding in essentially depends on how it is perceived by the employee. In particular, the ndings indicate that the use of contingent rewards for standard tasks is likely seen as a means of control or as a signal of bad task attributes, hence crowds out intrinsic motivation. For more complex tasks, contingent rewards are not found to be negative reinforcers and, if based on individual appraisals, raise employees intrinsic motivation consistently with the idea that they are perceived as genuine signals of trust on the part of the employer. On the whole, this paper suggests that rms should invest in empowerment practices both because they are the sole instrument to increase their employees sense of identity, loyalty and share of values and because they outperform the wage in retaining employees; contingent pecuniary rewards, specially if based on the team performance, are, instead, unwise as they signicantly reduce employees attachment to the organization while leaving employees value commitment unaected. Self managed teams show mixed results on commitment, largely depending on the extent of autonomy they are granted, but are always a mediocre practice when fully autonomous. Finally, the empirical relevance of innovative practices diers greatly across educational groups, suggesting that specic practices may complement specic skills, a result which deserves further investigation.

19

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Table 1: Share of employees by workplace practices and educational attainments

All employees empowerment practices SUGGEST MEET TEAM QUALITY TASK RESP GROUP QC contingent rewards EARN TEAMPAY TRAIN nr. observations 0.13 0.08 0.10 3605 0.06 0.05 0.08 878 0.06 0.07 0.08 538 0.15 0.09 0.10 1709 0.29 0.14 0.19 480 0.71 0.56 0.47 0.43 0.38 0.33 0.26 0.09 0.58 0.38 0.49 0.34 0.36 0.33 0.24 0.07 0.65 0.45 0.43 0.37 0.36 0.33 0.29 0.09 0.75 0.62 0.46 0.46 0.38 0.32 0.25 0.09 0.86 0.78 0.49 0.52 0.45 0.38 0.33 0.12 Compulsory Vocational Technical Tertiary

Notes: Compulsory: 10 years of schooling; vocational secondary: 1 to 3 years of postcompulsory school; technical secondary: 5 years of post compulsory school; tertiary: undergraduate and graduate degrees.

Table 2: Dierences in organizational commitment between employees involved and employees not involved. By workplace practices

(1) value comm empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN TRAIN 0.12* 0.20** 0.20** 0.46** 0.35** 0.30** 0.05 0.00 0.10** 0.04 0.04

(2) strong comm

(3) inspires

(4) proud

(5) share values

(6) loyal

(7) work harder

(8) any job

(9) no quit

0.06 0.10** 0.13 -0.01 0.02 0.01 -0.05 -0.06

0.30** 0.27** 0.19** 0.01 -0.09* 0.02 0.02 -0.04

0.42** 0.38** 0.33** 0.10** 0.04 0.12** 0.01 0.02

0.35** 0.24** 0.21** -0.03 -0.08* 0.03 0.02 -0.01

0.64** 0.46** 0.36** 0.07 0.13** 0.19** 0.07 0.13**

0.50** 0.41** 0.40** 0.12** 0.10** 0.20** 0.13** 0.16**

-0.12** -0.07 -0.03 -0.11** 0.04 0.00 -0.07 -0.05

0.22** 0.26** 0.23** 0.05 -0.02 0.01 -0.06 -0.08

-0.02 0.03 0.03

-0.02 0.18** 0.20**

0.20** 0.32** 0.26**

0.03 0.16** 0.15**

0.23** 0.23** 0.28**

0.16* 0.24** 0.23**

-0.15 -0.08 -0.05

0.07 0.12 0.10

Notes: Number of observations: 3605. **Signicant at the 5% level or less *Signicant at the 10 % level

Table 3: Overall working conditions

Physical working conditions accidents exhaustion eort intensity (1) (2) (3) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN 0.120 (0.23) 0.718*** (0.22) 0.174 (0.22) 2.090 (1.28) Yes Yes Yes Yes Yes Yes 0.341 0.643*** (0.18) 0.075 (0.17) 0.039 (0.17) 6.208*** (0.98) Yes Yes Yes Yes Yes Yes 0.152 0.100 (0.10) 0.244*** (0.09) 0.089 (0.09) 2.276*** (0.54) Yes Yes Yes Yes Yes Yes 0.138 0.346*** (0.10) 0.112 (0.09) 0.059 (0.09) 0.217 (0.53) Yes Yes Yes Yes Yes Yes 0.199 0.012 (0.20) 0.765*** (0.19) 0.027 (0.19) 0.002 (1.12) Yes Yes Yes Yes Yes Yes 0.164 0.198* (0.11) 0.013 (0.10) 0.046 (0.10) 0.687 (0.61) Yes Yes Yes Yes Yes Yes 0.127 0.069 (0.10) 0.002 (0.09) 0.156 (0.10) 2.072*** (0.55) Yes Yes Yes Yes Yes Yes 0.318 0.126 (0.12) 0.105 (0.12) 0.098 (0.12) 2.828*** (0.67) Yes Yes Yes Yes Yes Yes 0.255 0.130 (0.13) 0.089 (0.13) 0.014 (0.20) 0.176 (0.12) 0.173 (0.21) 0.268 (0.24) 0.230 (0.22) 0.313 (0.22) 0.151 (0.10) 0.409*** (0.10) 0.393** (0.15) 0.313*** (0.09) 0.423** (0.16) 0.513*** (0.19) 0.429** (0.17) 0.042 (0.17) 0.083 (0.05) 0.191*** (0.05) 0.074 (0.09) 0.184*** (0.05) 0.077 (0.09) 0.206** (0.10) 0.269*** (0.09) 0.108 (0.09) 0.168*** (0.05) 0.006 (0.05) 0.162* (0.08) 0.089* (0.05) 0.098 (0.09) 0.222** (0.10) 0.082 (0.09) 0.010 (0.09) 0.375*** (0.11) 0.429*** (0.11) 0.361** (0.18) 0.123 (0.11) 0.548*** (0.19) 0.381* (0.21) 0.181 (0.19) 0.072 (0.19) 0.089 (0.06) 0.152** (0.06) 0.057 (0.10) 0.188*** (0.06) 0.025 (0.10) 0.097 (0.11) 0.308*** (0.11) 0.134 (0.10) 0.401*** (0.05) 0.150*** (0.05) 0.038 (0.09) 0.051 (0.05) 0.313*** (0.09) 0.241** (0.10) 0.180* (0.10) 0.010 (0.09) 0.418*** (0.07) 0.279*** (0.07) 0.364*** (0.11) 0.121* (0.06) 0.537*** (0.11) 0.331*** (0.13) 0.573*** (0.12) 0.296*** (0.11) Job security prob. unemployment (4) Job content repetitiveness supervision (5) (6) discretion (7) autonomy (8)

TRAIN

constant indiv. controls wrkpl-rm dum 21 region dum 40 sector dum 8 occup dum 10 org dum R sq.

Notes: Standard errors in parenthesis; ***Signicant at the 1% level **Signicant at the 5% level *Signicant at the 10 % level SUR estimates. Number of observations: 3529 (due to missing values in the sector dummies). Breusch-Pagan test of independence: chi2(28) = 1805.265, Pr = 0.0000. See Appendix for the list of controls

29

Table 4: Wage and commitment

Wage OLS (1) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN 0.037* (0.02) 0.090*** (0.02) 0.038* (0.02) 0.257*** (0.10) 0.149* (0.09) 0.015 (0.09) -0.021 -0.013 0.081 (0.10) 0.022 (0.09) 0.114 (0.09) -0.021 0.006 0.009 (0.02) 0.015 (0.01) 0.015 (0.02) 0.007 (0.01) 0.014 (0.02) 0.061*** (0.02) 0.011 (0.02) 0.045** (0.02) 0.052 (0.08) 0.336*** (0.05) 0.288*** (0.08) 0.014 (0.05) 0.170** (0.09) 0.409*** (0.10) 0.018 (0.10) 0.301*** (0.09) 0.005 0.033 0.031 -0.001 -0.016 0.050 -0.002 -0.027 0.124* (0.08) 0.180*** (0.05) 0.234*** (0.08) 0.184*** (0.05) 0.127 (0.09) 0.352*** (0.10) 0.129 (0.10) 0.140 (0.09) 0.032 0.047 0.061 -0.048 -0.033 0.092 -0.034 -0.037 Strong commitment ordered prob. marg.e. (2) (3) Value commitment ordered prob. marg.e. (4) (5)

TRAIN

0.001

0.030

relative wage w job attributes accidents exhaustion eort intensity prob.unemployment repetitiveness supervision discretion autonomy instrument for constant 0.003* (0.00) 0.001 (0.00) 0.004 (0.01) 0.002 (0.00) 0.004* (0.00) 0.005 (0.01) 0.014 (0.01) 0.006 (0.01) 0.098** (0.05) 0.047 (0.12) Yes Yes Yes Yes Yes Yes 3016 0.007 (0.01) 0.030** (0.01) 0.051** (0.02) 0.019 (0.02) 0.008 (0.01) 0.036 (0.02) 0.035 (0.05) 0.066 (0.04) 0.275 (0.20) 0.001 (0.01) 0.027** (0.01) 0.039* (0.02) 0.149*** (0.02) 0.043*** (0.01) 0.004 (0.03) 0.187*** (0.05) 0.111** (0.04) 0.428** (0.21) 0.193** (0.08) 0.018 0.039 (0.08) 0.010

indiv. controls wrkpl-rm dum 21 region dum 40 sector dum 10 org dum 8 soc dum R sq. N

Yes Yes Yes Yes Yes Yes 3016

Yes Yes Yes Yes Yes Yes 3016

Notes: Standard errors in parenthesis; ***Signicant at the 1% level **Signicant at the 5% level *Signicant at the 10 % level. The marginal eects are computed for category 6; bold numbers indicate statistical signicance at 10% or less. The cut points of the ordered probits are not shown for reasons of space. See Appendix for the list of controls. The instrument for is the rst factor obtained from the factor analysis performed on the SUR residuals using the principal factor method; it explains a proportion of 0.98 of the variance. Number of observations are 3016 due to missing values in the wage and the sector dummies.

30

Table 5: Normalized marginal eects of empowerment practices and contingent rewards on commitment. Direct and indirect eects
Strong Commitment Intrinsic motivation (1) (2) (4) Wage Working conditions (3) Total Intrinsic Motivation (1) Wage (2) Value Commitment Working conditions (3) Total (4)

31
average emp. practices contingent rewards EARN TEAMPAY -0.182 -0.295 -0.239 0.020 -0.089 0.005 -0.065 -0.003 0.027 -0.215 0.129 -0.135 0.016 0.039 -0.038 -0.392 average cont. monetary rew. TRAIN 0.203 -0.015 -0.007 0.180 average emp. practices contingent rewards APP EARN TEAMPAY APP TRAIN

empowerment practices TEAM+TASK MEET QC TEAM+TASK+GROUP TEAM+TASK+RESP QUALITY SUGGEST SELFTEAM TEAM 0.477 0.451 0.435 0.453 0.102 -0.019 0.069 0.078 -0.222 -0.033 -0.028 -0.092 -0.107 -0.001 0.066 -0.012 -0.075 0.146 0.008 0.012 0.005 -0.045 0.015 0.013 -0.029 -0.037 -0.007 0.451 0.436 0.347 0.301 0.115 0.060 0.028 -0.035 -0.083 0.110 0.159 0.197 0.073 0.206 0.083 -0.041 -0.163 -0.112 0.057

empowerment practices SUGGEST MEET TEAM+TASK TEAM+TASK+RESP QC TEAM+TASK+GROUP SELFTEAM QUALITY TEAM

0.023 0.004 0.071 0.090 -0.047 -0.053 -0.033 0.015 0.078 0.016

0.129 0.063 -0.066 -0.064 -0.067 -0.008 -0.006 0.035 -0.120 -0.011

0.262 0.226 0.202 0.100 0.092 0.022 -0.081 -0.112 -0.155 0.062

0.020 -0.072 -0.026 0.101

0.062 -0.016 0.023 0.005

0.029 0.008 0.018 0.038

0.111 -0.080 0.015 0.145

average cont. monetary rew.

Notes: The normalized marginal eects reported in the Table are obtained as the ratio between the marginal eects (dy/dx), computed for category 6, and the frequency of the category. The normalization is computed in order to compare the eects of the practices across type of commitments; the frequency of category 6 is 29.6% for value commitment and 7.2% for strong commitment. Total is the sum of the previous three columns. The marginal eects used in col.(1) are obtained from the marginal eects of equation (9) and reported in column 1 of Table 9 in the appendix; the marginal eect used in col.(2) are obtained from the dierence between the marginal eect of equation (12) and those of equation (10); notice that the wage indirect eects also include the interacted wage-working conditions eects. The marginal eects used in col.(3) are obtained from the dierence between the marginal eects of equation (10) and those of equation (9). All marginal eects are reported in Table9 in the appendix. SELFTEAM corresponds to TEAM+TASK+GROUP+RESP.

Table 6: Commitment by education. Ordered probit

(1) compulsory empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN 0.854*** (0.25) 0.189 (0.23) 0.539** (0.22) 0.498** (0.24) 0.391*** (0.12) 0.043 (0.23) 0.208 (0.27) 0.143 (0.25) 0.166 (0.13) 0.206* (0.12) 0.097 (0.30) 0.269 (0.21) 0.552** (0.25) 0.275 (0.24) 0.273 (0.22) 0.002 (0.28) 0.403 (0.26) 0.155 (0.25) 0.143 (0.13) 0.088 (0.12) 0.442*** (0.13) 0.120 (0.32) 0.422* (0.22) 0.175 (0.24) Strong commitment (2) (3) vocational technical (4) tertiary (5) compulsory (8) tertiary Value commitment (6) (7) vocational technical

32
TRAIN relative wage w job attributes other conts wrkpl-rm dum sector dum org dum N 0.323* (0.18) Yes Yes Yes Yes Yes 751 0.920*** (0.22) Yes Yes Yes Yes Yes 462 0.039 (0.13) Yes Yes Yes Yes Yes 1449 0.078 (0.30) Yes Yes Yes Yes Yes 354

0.037 (0.11) 0.483*** (0.11) 0.729*** (0.19) 0.021 (0.10) 0.466*** (0.17) 0.350* (0.20) 0.228 (0.19) 0.062 (0.19)

0.108 (0.15) 0.302** (0.14) 0.228 (0.23) 0.042 (0.14) 0.268 (0.26) 0.122 (0.29) 0.723*** (0.27) 0.055 (0.27)

0.099 (0.08) 0.098 (0.07) 0.089 (0.11) 0.066 (0.06) 0.063 (0.13) 0.400*** (0.15) 0.273* (0.14) 0.538*** (0.13)

0.010 (0.24) 0.213 (0.23) 0.011 (0.30) 0.496*** (0.18) 0.695 (0.51) 1.073** (0.53) 0.805** (0.34) 0.571 (0.37)

0.187 (0.12) 0.351*** (0.11) 0.181 (0.19) 0.439*** (0.11) 0.153 (0.17) 0.233 (0.20) 0.142 (0.20) 0.190 (0.19)

0.098 (0.16) 0.187 (0.15) 0.069 (0.23) 0.389*** (0.15) 0.173 (0.27) 0.421 (0.29) 0.278 (0.28) 0.154 (0.28)

0.071 (0.08) 0.076 (0.07) 0.460*** (0.11) 0.191*** (0.07) 0.057 (0.13) 0.229 (0.15) 0.053 (0.14) 0.407*** (0.13)

0.547** (0.25) 0.013 (0.24) 0.431 (0.31) 0.089 (0.19) 0.046 (0.51) 0.598 (0.54) 0.003 (0.35) 0.277 (0.39)

0.079 (0.18) Yes Yes Yes Yes Yes 751

0.051 (0.23) Yes Yes Yes Yes Yes 462

0.149 (0.14) Yes Yes Yes Yes Yes 1449

0.194 (0.31) Yes Yes Yes Yes Yes 354

Notes: Standard errors in parenthesis; ***Signicant at the 1% level **Signicant at the 5% level *Signicant at the 10 % level; see also Notes to Table 4.

Appendix

Table 7: Types of teams

task autonomous 1 1 0 0 245 6.80 14.53 output responsible 1 0 1 0 102 2.83 6.05 group autonomous 1 0 0 1 10 0.28 0.59 task auto & output resp 1 1 1 0 203 5.63 12.04 output resp & group auto 1 0 1 1 7 0.19 0.42 task & group autonomous 1 1 0 1 45 1.25 2.67 fully autonomous 1 1 1 1 802 22.25 47.57 lean 1 0 0 0 184 5.10 10.91

TEAM TASK RESP GROUP nr. employees % of total employees % of team-workers

34

Table 8: Estimated reduced forms of commitment equations

Strong commitment (1) empowerment practices SUGGEST QC MEET QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN 0.354*** (0.08) 0.036 (0.08) 0.066 (0.08) 0.214** (0.09) 0.132 (0.08) 0.018 (0.08) 0.318*** (0.08) 0.026 (0.08) 0.045 (0.08) 0.109 (0.08) 0.109 (0.08) 0.120 (0.08) 0.073 (0.10) 0.055 (0.09) 0.160* (0.09) 0.090 (0.08) 0.127 (0.08) 0.167** (0.08) 0.014 (0.05) 0.238*** (0.07) 0.273*** (0.05) 0.028 (0.04) 0.022 (0.08) 0.330*** (0.08) 0.102 (0.08) 0.241*** (0.08) 0.030 (0.05) 0.287*** (0.08) 0.340*** (0.05) 0.004 (0.05) 0.172** (0.08) 0.492*** (0.10) 0.058 (0.09) 0.290*** (0.09) 0.019 (0.04) 0.217*** (0.07) 0.297*** (0.04) 0.041 (0.04) 0.057 (0.07) 0.350*** (0.08) 0.106 (0.08) 0.241*** (0.08) 0.151*** (0.05) 0.174** (0.07) 0.189*** (0.05) 0.168*** (0.04) 0.063 (0.08) 0.362*** (0.09) 0.292*** (0.08) 0.085 (0.08) 0.274*** (0.05) 0.160** (0.08) 0.255*** (0.05) 0.146*** (0.05) 0.267*** (0.09) 0.423*** (0.10) 0.065 (0.09) 0.140 (0.09) 0.300*** (0.04) 0.106 (0.07) 0.259*** (0.05) 0.128*** (0.04) 0.177** (0.08) 0.415*** (0.09) 0.205*** (0.08) 0.117 (0.08) (2) (3) (4) Value commitment (5) (6)

TRAIN relative wage w job attributes accidents exhaustion eort intensity prob unemployemnt repetitiveness supervision discretion autonomy instrument for

0.185** (0.08)

0.056 (0.08)

0.004 (0.01) 0.024** (0.01) 0.030 (0.02) 0.046*** (0.02) 0.015* (0.01) 0.021 (0.02) 0.083** (0.03) 0.012 (0.03) 0.045 (0.14) Yes Yes Yes Yes Yes Yes 3529

0.133*** (0.03) Yes Yes Yes Yes Yes Yes 3016 Yes Yes Yes Yes Yes Yes 3529

0.001 (0.01) 0.014 (0.01) 0.033* (0.02) 0.142*** (0.02) 0.040*** (0.01) 0.017 (0.02) 0.182*** (0.04) 0.107*** (0.03) 0.401*** (0.14) Yes Yes Yes Yes Yes Yes 3529

0.207*** (0.03) Yes Yes Yes Yes Yes Yes 3016 Yes Yes Yes Yes Yes Yes 3529

indiv conts wrkpl-rm dum 21 region dum 40 sector dum 10 org dum 8 soc dum R sq. N

Notes: Standard errors in parenthesis; ***Signicant at the 1% level **Signicant at the 5% level *Signicant at the 10 % level. Ordered Probit estimates. The cut points of the ordered probits are not shown for reasons of space. See Appendix for the list of controls. The instrument for is the rst factor obtained from the factor analysis performed on the SUR residuals using the principal factor method; it explains a proportion of 0.94 of the variance.

35

Table 9: Marginal eects from the structural and the reduced form models
(1) practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN TRAIN relative wage w 0.005 0.033 0.031 -0.001 -0.016 0.050 -0.002 -0.027 -0.021 -0.013 0.001 0.018 Strong commitment (2) (3) -0.001 0.028 0.027 0.003 -0.002 0.036 -0.010 -0.024 -0.030 -0.004 -0.007 0.003 0.033 0.032 0.000 -0.016 0.051 -0.006 -0.026 -0.018 -0.012 0.002 0.018 (4) 0.002 0.031 0.025 0.004 -0.006 0.038 -0.011 -0.024 -0.028 -0.003 -0.005 (1) 0.032 0.047 0.061 -0.048 -0.033 0.092 -0.034 -0.037 -0.021 0.006 0.030 0.010 Value commitment (2) (3) 0.040 0.050 0.046 -0.045 -0.017 0.095 -0.077 -0.023 -0.029 0.029 0.032 0.071 0.066 0.041 -0.038 -0.069 0.108 -0.017 -0.036 -0.019 0.014 0.041 0.014 (4) 0.078 0.067 0.027 -0.033 -0.046 0.106 -0.053 -0.030 -0.024 0.033 0.043

Notes: Columns 1 show the marginal eects from equation (9) in the text; columns 2 show the marginal eects after substituting for the wage, corresponding to equation (11) in the text; columns 3 show the marginal eects after substituting for working conditions corresponding to equation (10) in the text; columns 4 show the marginal eects after substituting for both the wage and working conditions, corresponding to equation (12) in the text. Bold coecients are signicant at least at 10%. Recall that value and strong commitment are 1-7 categorical variables; the marginal eects are relative to category 6; the frequency of value commitment in category 6 is 29.6% whereas the frequency of strong commitment in the same category is 7.2%.

36

Table 10: The wage regression by educational attainments

compulsory (1) empowerment practices SUGGEST MEET QC QUALITY TEAM TASK GROUP RESP contingent rewards TEAMPAY EARN 0.042 (0.06) 0.169*** (0.05) 0.107** (0.05) 0.013 (0.06) 0.118** (0.06) 0.013 (0.06) 0.013 (0.03) 0.018 (0.02) 0.010 (0.03) 0.009 (0.06) 0.115*** (0.04) 0.023 (0.04) 0.019 (0.03) 0.073*** (0.02) 0.036 (0.04) 0.027 (0.02) 0.017 (0.04) 0.050 (0.04) 0.069 (0.04) 0.095** (0.04) 0.075** (0.04) 0.024 (0.03) 0.024 (0.05) 0.014 (0.03) 0.019 (0.06) 0.144** (0.07) 0.211*** (0.06) 0.017 (0.06) 0.016 (0.02) 0.061*** (0.02) 0.001 (0.02) 0.005 (0.01) 0.073*** (0.03) 0.070** (0.03) 0.020 (0.03) 0.005 (0.03) 0.047 (0.05) 0.094** (0.04) 0.001 (0.06) 0.069* (0.04) 0.132 (0.10) 0.007 (0.10) 0.119* (0.07) 0.181** (0.07) vocational (2) technical (3) tertiary (4)

TRAIN job attributes accidents exhaustion eort intensity prob unemployement repetitiveness supervision discretion autonomy instrument for constant oother conts wrkpl-rm dum sector dum org dum R sq. N

0.005* (0.00) 0.009* (0.01) 0.010 (0.01) 0.011 (0.01) 0.011*** (0.00) 0.012 (0.01) 0.023 (0.02) 0.017 (0.01) 0.036 (0.06) 5.324*** (0.24) Yes Yes Yes Yes 0.632 751

0.014*** (0.00) 0.020*** (0.01) 0.034** (0.01) 0.008 (0.01) 0.006 (0.01) 0.006 (0.02) 0.008 (0.02) 0.044** (0.02) 0.050 (0.09) 6.221*** (0.35) Yes Yes Yes Yes 0.553 462

0.001 (0.00) 0.005 (0.00) 0.002 (0.01) 0.012** (0.01) 0.001 (0.00) 0.007 (0.01) 0.001 (0.01) 0.004 (0.01) 0.041 (0.04) 4.929*** (0.16) Yes Yes Yes Yes 0.639 1449

0.006 (0.01) 0.004 (0.01) 0.020 (0.01) 0.004 (0.01) 0.016* (0.01) 0.004 (0.01) 0.088*** (0.03) 0.001 (0.02) 0.031 (0.08) 6.086*** (0.42) Yes Yes Yes Yes 0.831 354

Notes: Standard errors in parenthesis; ***Signicant at the 1% level **Signicant at the 5% level *Signicant at the 10% level. See Appendix for list of controls and Notes to Table 4.

37

Table 11: Values of to satisfy d /d > 0.

Intrinsic motivation / a3 + + + + Total Wage dw/d + + + + Working condition d/ a1 + + + + Values of ( > 0) for d /d > 0 Notes

for all > (b3 |a1 | )/(a3 ) > (|| b3 a1 )/(a3 + ||) > (|| + b3 a1 )/(a3 + ||) < ( + b3 a1 )/(|a3 | + ) < ( b3 |a1 |)/(|a3 | + ) < (b3 a1 ||)/(|a3 | + ||) for no

for for for for for for for

all if a3 > > b3 |a1 | no if a3 < < b3 |a1 | all if || < b3 a1 suciently large suciently small no if < b3 |a1 | no if || > b3 a1 .

Notes: For convenience we let: a3 = / , = dw/d , a1 = d/

Table 12: Classication of practices according to their estimated marginal eects.

Sign of the marginal eect on: Intrinsic motivation Total Wage Working conditions 3 3 2 + 3 2 A1 3 A1 + + + + + + + + + + + + TEAM+TASK, MEET, QC,TEAM+TASK+RESP, TRAIN TEAM+TASK+GROUP, SUGG, SELFTEAM QUALITY, EARN TEAM TEAMPAY QC QUALITY TEAM TEAMPAY SELFTEAM Strong Commitment Value Commitment

SUGG, MEET, TRAIN TEAM+TASK, TEAM+RESP

Notes: Practices are classied according to their estimated eects shown in Table 5. Bold typeface indicate that the overall eect on commitment is positive.

38

Table 13: List of controls included in regressions

individual controls: female age age squared experience tenure high school vocational high school technical high school university master/doctorate rst degree union member full time job permanent job commuting cost% pension/insurance scheme overeducation* extent of pc use skill level shift work supervisor child dummy child below 6 yrs dummy married divorced nr. child mother married mother not married 8 occupational dummies 17 organizational area dummies rm and workplace controls: workplace located in the South union presence job prevalent female job prevalent male wrkp size dummy2 (5 to 15) wrkp size dummy3 (15 to 50) wrkp size dummy4 (more than 50) rm size dummy2 (15 to 100) rm size dummy3 (100 to 500) rm size dummy4 (more than 500) 40 sector dummies 21 region dummies

*Overeducation is given by the dierence between the actual level of education and the respondents assessment of the education level actually needed to cover the position she holds: positive values indicate excess education, negative value indicate an educational decit. % Commuting cost is computed on the basis of the distance between the county town of the workplace location and the county town of residence and imputing the estimated cost of motoring.

39