Value appropriation and value creation : fairness perceptions of knowledge workers and traditional workers

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Value appropriation and value creation:

Fairness perceptions of knowledge workers and traditional workers

Master Thesis

Behavioral Foundations of Strategy

Business Studies

University of Amsterdam

Name

Anniek Schouten

6077056

Supervisor

Dr. ir. J.W. Stoelhorst

Date

04-08-14

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Abstract

Performance of knowledge-driven firms is largely dependent on motivation of employees. Whereas the resource-based view assumes that employees are always fully motivated to work in line with goals of the firm, this is not the case in reality. Namely, a fair division of value is a necessary condition to sustain employee effort towards the goals of the firm. Violation of social norms around value division can elicit negative fairness perceptions. These negative fairness perceptions about value division can result in a decrease of effort. Violation of social norms of value appropriation can thus diminish value creation. However, social norms about value division are not similar for every situation. Different sets of social norms seem to arise, depending on whether or not the firm is profitable. Previous research suggests that social norms about value division differ for knowledge work and traditional work. This thesis is aimed at understanding the relation between value appropriation and value creation, and studies the reaction of employees to a wage decrease under different circumstances of profitability of the firm and nature of work. It is furthermore studied how the nature of work and social value orientation moderate the relation between fairness perceptions and effort. The hypotheses were tested in a vignette study (N = 216). The findings suggest that violating social norms has a negative effect on employee effort. Firms should take into account social norms around profitability of the firm, namely effort is slightly lower when the firm is profitable. Furthermore, the results give some indication that fairness perceptions about a wage decrease are more negative for traditional worker than for knowledge workers, and thus different sets of social norms seem to exists for these two types of work. It is furthermore suggested that social value orientation of the employee affects the behavioral reaction to fairness perceptions. A more profound understanding of the microfoundations that underlie value creation enables firms to make decisions about value division that benefit the creation of value.

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1. Introduction

Firms compete increasingly on the basis of knowledge (Grant, 1996). The success of firms is increasingly rooted in the contributions of knowledge workers, whereas the number of manufacturing jobs decreases because of technological innovation (Gera & Mang, 1998). There is a shift to knowledge-based growth, characterized by innovation and ideas, falling costs and rising efficiency. In this new economy, the ability to create wealth is increasingly dependent on the effective management of the resource knowledge (Gera & Mang, 1998) that ultimately resides at the level of individuals (Foss, 2007). The Resource-Based View (RBV) argues that the value that is created by all resources, including human resources, can result in a competitive advantage for the firm (Barney, 1991). However, they overlook several important factors that play a role in the creation of value. Employees who possess knowledge that is important for the firm’s value creation have a lot of bargaining power. This strong bargaining position allows employees to appropriate most of the value they produce for the firm (Coff, 1999). Thus, valuable human resources do not necessarily provide greater profitability (Coff, 1999).

A second factor the RBV overlooks is that motivation influences value creation (Gottschalg & Zollo, 2007; El Haji & Stoelhorst, 2010). Human resources have the potential to create value for the firm. However, in order to create this value, employees must be motivated to behave in line with the firm’s interests (Gottschalg & Zollo, 2007). Firms need to understand the factors that influence employee motivation, in order to maximize effort by human resources and thus value creation. While the RBV is aimed at explaining performance differences, it does not incorporate the role of human motivation and the bargaining power of employees (Coff, 1999; El Haji & Stoelhorst, 2010). However, in order to explain performance differences between firms, we do need to understand human motivation. Only

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6 then we can understand the relationship between value creation and value appropriation (Nadler & Lawler, 1989; El Haji & Stoelhorst, 2010).

Kahneman, Knetsch and Thaler (1986) argue that treating employees fairly is a necessary condition for maintaining employee effort. The amount of value an employee appropriates from the value he or she helps create influences the employee’s effort. This division of value can be perceived by employees as fair or unfair, which in turn may affect the amount of effort employees put into their work (Kahneman et al., 1986; El Haji & Stoelhorst, 2010).

Social norms that are accepted by employees are the foundation for such fairness perceptions (Fehr & Gatcher, 2000). When social norms are violated, fairness perceptions are negative and when a firm acts according to the prevailing social norms, fairness perceptions are positive. In our economy, there seems to be a social norm that employees are entitled to receive at least their current wage (Blinder & Choi, 1990; Agell & Lundborg, 1995; Campbell & Kamlani, 1997). Because firms do not want to violate this norm, they do not tend to lower wages when unemployment rates are high (Fehr & Gatcher, 2000). This is called wage rigidity (Campbell & Kamlani, 1997).

However, it is plausible that not every employee reacts in the same way to a wage decrease. Whether an employee perceives a wage decrease as fair or unfair seems to depend on several factors. Kahneman et al. (1986) argue that the profitability of the firm, meaning whether the firm is making or losing money, is an important factor that has great influence on fairness perceptions. Since fairness perceptions seem to influence motivation and effort, profitability of the firm seems to have an effect on how much effort employees put into their work. Secondly, the nature of work of the employee, meaning whether or not the employee has intellectual input into the products of the firm, seems to influence fairness perceptions (El Haji & Stoelhorst, 2010). Nature of work may not only influence fairness perceptions, but

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7 also the behavioral reaction to the wage decrease. How much effort employees put into their work when fairness perceptions are negative may thus depend on the nature of work of an employee. The behavioral reaction to negative fairness perceptions may not only depend on job characteristics, but also on the personality of the individual. Individuals have different social value orientations (SVO) (Felin & Hesterly, 2007). Individuals may react differently to negative fairness perceptions than prosocials.

This thesis is aimed at understanding the relation between value appropriation and value creation, and asks the question: How do employees react to a wage decrease and what factors influence this reaction? The reaction to a wage decrease under different circumstances is researched. More specifically, it is examined whether profitability of the firm influences effort and if this relation is mediated by fairness perception. Furthermore, I will study whether the relationship between profitability of the firm and fairness perception is moderated by the nature of work. It is also studied if the behavioral reaction to fairness perceptions is affected by nature of work, namely the effect of fairness perceptions on effort and how this effect differs for knowledge workers and traditional workers. Finally, I will study whether social value orientation influences the relation between fairness perception and effort.

This thesis is structured as follows. The next chapter gives an overview of relevant literature that serves as the foundation of the research questions. In chapter three the conceptual framework is provided and hypotheses are drawn. Chapter four describes the research methodology and in chapter five the results will be presented. Afterwards, in chapter six the findings are discussed in reference to the existing literature. Furthermore, implications for theory and practice are discussed and limitations and directions for future research are suggested. The last chapter, chapter 7, will give a short conclusion of the study.

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2. Literature review

This chapter discusses the literature with regard to human resources in the Resource-Based View (RBV) and employee motivation. Furthermore research on fairness perceptions about the division of value is presented, and the role of profitability of the firm with respect to fairness perceptions is discussed. The difference between knowledge workers and traditional workers, with regard to social norms and job characteristics is examined. Because individuals in organizations have heterogeneous personalities, the role of different social value orientations is discussed. The final section reveals the gap and the contributions of this study.

2.1. Resource-based view and human resources

The RBV argues that resources that are valuable, rare, hard to imitate and non-substitutable are a firm’s source of competitive advantage (Barney, 1991). Knowledge-based resources are increasingly important for the firm’s competitive position (Gera & Mang, 1998). They are especially important for value creation, because firm-specificity, causal ambiguity, and social complexity make them hard to imitate (Coff, 1999). The RBV assumes that the firm appropriates all the value that resources generate. Although this might be true for non-human resources, the firm does not necessarily appropriate the value that non-human resources create (Coff, 1999). Employees with important knowledge have a strong bargaining position. As a result, these employees will appropriate the value they help create, which is expressed in high wages. Thus, human resources with important knowledge and abilities will not necessarily give the firm a competitive advantage (Coff, 1999).

There is another characteristic of human resources that the RBV does not take into account: human motivation. Humans choose freely how much effort they put into their work, so they can decide to what extent they behave in line with organizational goals (Gottschalg & Zollo, 2007). Individuals make decisions about the amount of effort they will direct towards

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9 performing their jobs: how hard to work, how much to produce and at what quality (Nadler & Lawler, 1989). Thus, employees’ motivation is an essential factor that determines how much value the firm creates, because motivation determines how much effort employees will put into their work (Gottschalg & Zollo, 2007). We therefore need to study the foundations of human behavior in order to understand the relationship between value creation and value appropriation (El Haji & Stoelhorst, 2010).

Taking into account these aspects of human resources (motivation and bargaining power of employees) is especially important for knowledge-driven firms that depend on the intellectual contributions of knowledge workers. Knowledge is a resource that resides at the level of the individual (Foss, 2007), so understanding what motivates individuals to work towards the goals of the firm is important in explaining performance differences between firms. The traditional focus of the RBV on the collectivist level of organizational capabilities obscures important micro-mechanisms (Foss, 2007). Foundations that underlie employee motivation and ultimately employee effort need to be researched.

2.2. Assumptions about motivation in the Resource-Based View

The RBV and the bargaining power view make contradicting assumptions about behavioral foundations. In the RBV, there is an implicit assumption that employees always behave as altruists, irrespective of how much value they appropriate (Felin & Foss, 2005). This means employees would always contribute in line with the firm’s interests. However, this assumption is shown to be unrealistic (Felin & Foss, 2005).

Opposed to the RBV, research from the bargaining power view makes the standard economic assumption that every human is a self-regarding and rational agent that maximizes his or her own outcomes and acts in respond to market conditions. This means that the bargaining position of employees determines how much value they appropriate (Coff, 1999).

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10 However, this too is incongruent with empirical evidence from behavioral economists (Felin & Foss, 2005). Both of these assumptions do not correspond with the way people behave in reality. Many people deviate from purely self-regarding behavior in a reciprocal manner (Fehr & Gächter, 2000). Reciprocity means that in response to a friendly action, people are frequently much nicer and much more cooperative than predicted by the self-regarding model; conversely, in response to hostile actions they are frequently much more nasty and even brutal (Fehr & Gächter, 2000). Thus, employees’ behaviour seems not to be purely based on altruism or self-regard. Economic experiments suggest there is another motive that influences behaviour, namely fairness perception (e.g. Kahneman et al., 1986; Thaler, 1988; Hoffman et al., 1994; El Haji & Stoelhorst, 2010).

2.3. Fairness perception affects motivation

Fair distribution of value is a necessary condition to sustain effort towards goals of the firm (Kahneman, Knetsch & Thaler, 1986; El Haji & Stoelhorst, 2010). Evidence for the importance of fair treatment is found in results of the Ultimatum Game, which involves two-player bargaining. Player 1, the Proposer, is given 10 dollars, and is asked to divide it between herself and another player (Player 2, the Responder) whose identity is unknown to her. The Proposer must make the Responder an offer, and then the Responder can either accept the offer, in which case he or she will receive whatever is offered, or reject the offer, in which case both players will receive nothing (Thaler, 1988). Standard economic theory would assume the Responder would accept any offer higher than zero, because receiving some money is better than receiving no money at all. However, in reality a lot of participants reject a positive offer (Thaler, 1988). This contradicts the assumption that all humans are rational and self-regarding agents, and suggests that some individuals are reciprocal. This is negative reciprocity that occurs when an action that has a negative effect upon someone is reciprocated

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11 with an action that has approximately equal negative effect upon the other. In fact, the Proposer anticipates on the possibility of such rejection by offering just above 4 dollar (on average). Offering just 1 dollar would seem a risky strategy, because when the second player perceives this offer as unfair, it costs him only a dollar to reject is (Thaler, 1988; Kahneman et al., 1986). This tendency to propose an equal division is best explained as a strategic move: avoiding the expected negative consequences of violating a social norm about what a fair division is (Hoffman et al., 1994; El Haji & Stoelhorst, 2010).

The results of economic experiments like the Ultimatum Game suggests that there are social norms about the division of value that, when violated, will evoke perception of unfair treatment. In our economy, the existence of these social norms is visible in the case of wage rigidity. Economic theory reasons that when the economic situation leads to the possibility that employees could be easily replaced, they lose bargaining power and therefore appropriate less value (Coff, 1999). This would result in decreasing wages. However, in reality firms are not inclined to lower wages in these circumstances (Blinder & Choi 1990; Agell & Lundborg 1995; Campbell & Kamlani, 1997). Managers believe that employees will perceive wage cuts as an unfair action, a violation of social norms, and that this perception of unfair treatment will lower employees’ motivation (Fehr & Falk, 1999). Employees would respond by putting less effort into their work. Thus, in order to make sure effort stays intact, firms do not lower wages (Fehr & Falk, 1999).

2.4. Profitability and fairness perceptions: knowledge work and traditional work

The absence of considerations of fairness from standard economic theory is at big contrast with experiments from the social sciences. Perceptions of unfair treatment, triggered by violation of social norms, can cause employees to lower their effort (Kahneman, Knetsch & Thaler, 1986). El Haji and Stoelhorst (2010) also studied fairness perceptions about a wage

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12 decrease under circumstances of high unemployment. The results confirmed Kahneman et al. (1986), finding that a wage decrease is evaluated as fair if the firm is losing money, but a wage decrease is evaluated as unfair if the firm is profitable. However, these results change when employees’ knowledge input in the development of products was made explicit. In this case, decreasing wages was seen as unfair, irrespective of the profitability of the firm (El Haji & Stoelhorst, 2010). Knowledge workers contribute knowledge and ideas that determine the value of the firms products. When this knowledge input results in a substantial part of the value of a product, a different set of social norms may be triggered than the set of social norms that is triggered by the standardized input of traditional workers, for example employees in a factory (El Haji & Stoelhorst, 2010). In order for firms to maximize effort, these sets of social norms need to be understood (El Haji & Stoelhorst, 2010).

2.5. Moral property rights

Research by El Haji & Stoelhorst suggests there that knowledge workers might have a different reaction to a wage decrease than traditional workers. This difference could be explained by the existence of moral property rights (Oxoby & Spraggon, 2008). Moral property rights are described as perceived rights, or entitlements, that individuals feel towards something (Gächter & Riedl, 2005). These entitlements can be rooted in the extent of someone’s intellectual and creative input (e.g., Kahneman et al. 1986; Oxoby & Spraggon, 2008). Asher, Mahoney and Mahoney (2005) explain that property rights give you entitlement on the residual claim of the value that is created by a product or idea. Thus, if the developed good creates value for the firm, the creator of that good may feel that he or she has an earned right to that value.

Research in experimental economics by Oxoby and Spraggon (2008) argues that moral property rights influence fairness perceptions about the division of value. This is shown by

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13 variations on the Dictator Game. In the original Dictator Game, 2 players are involved. The first player, the Proposer, determines a division of 10 dollars. The second player, the Receiver, simply receives the money that is allocated to him or her by the Proposer. An average of roughly 20 percent of the endowment was given to the Receiver (Oxoby and Spraggon, 2008; List, 2007; Forsythe et al.,1994). The division of money changes when one of the players has to ‘earn’ the endowment (Oxoby and Spraggon, 2008). In a variation on the Dictator Game, the Dictator makes a test for which intellectual input is required. Dependent on the results of this test the Dictator gets an amount of money, he is asked to divide this between them. Zero offers were the result. However, in treatments where the Receiver makes the test, Dictators give the Receiver more than 50 percent of the earned money. These results emphasize the importance of property rights, created by intellectual input, in individuals’ preferences over fair value division (Oxoby & Spraggon, 2008).

Research by Gächter & Riedl (2002) also shows how moral property rights influence the perceived fairness of division of value. In their experiment, dyads had to imagine being department heads of the same firm and they had to negotiate about the division of an amount of money, which would represent their salaries. Performance of the individuals was measured with a general knowledge quiz. The department head who gave the most correct answers had shown the better performance. The results showed that the individual with the best score on the test feels the right to a larger share of the whole, thus a higher salary, and defends his moral property rights. The losing participant feels obligated to accept this. Gächter & Riedl (2002) argue that moral property rights influence perceived fairness of the division of value. These moral property rights influence fairness perceptions of the one who feels entitled to this moral property, but also those of others (Gächter & Riedl, 2002). Thus, property rights involve not only a relationship between an individual and a thing, but also relationships among individuals in relation to those things (Ackerman, 1977). The experiments by Oxoby

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14 & Spraggon (2008) and Gächter & Riedl (2002) imply there exists a social norm of moral property rights. When intellectual input from a person leads to certain outcomes, that person is perceived as entitled to the outcome.

Important to note is that this definition of moral property rights automatically implies that productivity of a knowledge worker is important: for knowledge workers to earn moral property rights, they need to create value for the firm. “Unsuccessful” knowledge workers would not have moral property rights, and thus lowering wages would seem as fair or unfair as traditional workers.

2.6. Effort: knowledge workers and traditional workers

As already pointed out, fairness perceptions seem to be based on whether social norms are violated or not (Kahneman et al., 1986; El Haji & Stoelhorst, 2010). Firms must understand and act according to these social norms to keep fairness perceptions positive. The set of social norms seems to differ between knowledge workers and traditional workers, because knowledge workers perceive moral property rights.

There is another reason why it is crucial to understand fairness perceptions of knowledge workers: the relationship between fairness perceptions and effort could differ for knowledge workers and traditional workers (Fehr & Falk, 1999; El Haji & Stoelhorst, 2010). Job characteristics of these work types are very different, and they could influence the behavioral reaction on fairness perceptions. Relevant job characteristics that might influence this relationship are completeness of contracts and salience of effort.

When the organization’s most important performance indicator is innovation and the creation of knowledge, there are more non-routine tasks and a higher level of interdependency among workers (Molleman & Timmerman, 2002). These factors increase the incompleteness of contracts between the employee and the firm and decrease the salience of the amount of

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15 effort that employees put into their work. Contracts for knowledge workers are relatively incomplete (Fehr & Falk, 1999). Where traditional workers have clearly defined tasks, knowledge work is more complex and interdependent and it is thus more difficult to set objective and measurable targets in a contract (Molleman & Timmerman, 2002; Altmann et al., 2010). The firm can enforce an incomplete contract less effectively, so there is more room for knowledge workers to lower effort without disobeying the contract. Whereas in the case of traditional workers, contracts are more complete, clearly defined tasks must be executed, thus contract enforcement is possible (Altmann et al., 2013). Furthermore, because of the complexity, it is difficult to supervise what knowledge workers are actually doing, with the result that effort is less salient for knowledge workers than for traditional workers (Fehr & Falk, 1999). This could influence the behavioral reaction to perceptions of unfairness, because employees might have a stronger tendency to lower effort if this decrease is not observed by their employer. Because of conditions of relatively incomplete contracts and lower salience of effort, knowledge workers have more opportunities to take advantage of employers (Fehr & Falk, 1999). In order to understand to what extent a violation of social norms affects value creation, the reaction of traditional and knowledge workers to fairness perceptions have to be studied.

2.7. Fairness perception and social value orientation

Researching behavioral foundations is crucial to understand value creation of the firm (Felin & Hesterly, 2007). As already explained, the relation between fairness perception and effort can depend on the nature of work (Fehr & Falk, 1999; El Haji & Stoelhorst, 2010). However, the behavioral reaction to fairness perceptions might not only depend on job characteristics, but also on the heterogeneity of individuals (Felin & Hesterly, 2007). Differences in human behavior are related to individuals’ social value orientation. Social

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16 value orientation has been defined as a person's preference about how to allocate resources between the self and another person (Messick & McClintock, 1968; De Dreu & Van Lange, 1995). According to social psychology and behavioral economics, people differ fundamentally with respect to their social value orientation. Social psychologists have found that most individuals can be classified as either individualist or prosocial (Kuhlman & Wimberley, 1976) and that these motives are stable personality traits (Bogaert, Boone, & Declerck, 2008). Individualists are motivated by maximizing their personal pay-offs (De Cremer & Van Lange, 2001) and act in response to market conditions. Prosocials are motivated by other-regarding preferences, fairness and reciprocity. Their actions depend on maximizing joint outcome and enforcing social norms (Fehr & Schmidt, 2005). A prosocial individual might react differently to a negative fairness perception than an individualist, because they are driven by different motives. I will study whether social value orientation influences the effect of fairness perceptions on effort.

2.8. Research gap

Although the landscape of firms is changing and knowledge work is increasingly important in the current economy (Gera & Mang, 1998; Grant, 1996), the literature has not yet made a distinction between traditional and knowledge workers in researching the consequences on the firm’s choices of value appropriation. Research by El Haji and Stoelhorst (2010) makes the suggestion that a unique set of social norms may exist around value appropriation for knowledge workers, which would influence fairness perceptions. Furthermore, because of the different characteristics of these types of work, the behavioral reaction to negative fairness perceptions of knowledge workers and traditional workers might differ (El Haji & Stoelhorst, 2010). These findings and suggestions encourage further research around this phenomenon. Firms need to know the factors that influence fairness perceptions

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17 and effort of their employees, in order to understand how their actions may affect value creation.

The research question that is asked in this thesis is: How do employees react to a wage decrease and what factors determine this reaction? In the context of this wage decrease, what is the effect of profitability of the firm on effort, and is this relationship mediated by fairness perceptions? How is nature of work related to this fairness perception about wage decrease, and more specifically: does nature of work moderate the relation between profitability and fairness perceptions? Is the relation between fairness perceptions and effort moderated by nature of work and social value orientation of the employee?

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3. Conceptual framework

In this chapter, the conceptual framework is presented. Furthermore, hypotheses are drawn based on the presented literature, in order to answer the research questions that were developed. Figure 1 shows an elaborate framework in which the relevant context of the variables is shown. It is shown how value appropriation and value creation are expected to relate according to previous research. In figure 2, the specific relations that are studied in this thesis are visualized. Since the decision about value appropriation was a constant factor in this thesis, namely the wage of the employee was always decreased, profitability of the firm is analyzed as independent variable. This means that the relations within figure 2 should be interpreted in the context of a wage decrease.

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Figure 2. Specific conceptual research framework in context of a wage decrease

3.1. Hypotheses

In order to study the effect of value appropriation on fairness perception and effort, I study a specific situation in which the wages of employees are decreased. In this hypothetical situation, previously used in the research by Kahneman et al. (1986), the firm chooses to decrease wages as a result of unemployment in the labor market. Because of unemployment, the firm would be able to hire similar performing individuals for a lower wage, and therefore adjusts the wages of the current employees to their relative bargaining position.

3.1.1. Profitability, effort and fairness

The economic reasoning described above is often not applied in our economy. This is visible in the rigidity of wages: firms do not tend to lower wages when unemployment rates are high. (Blinder & Choi 1990; Agell & Lundborg 1995; Campbell & Kamlani 1997). Managers believe that a wage decrease will result in lower employee motivation (Fehr & Falk, 1999). Employees respond by putting less effort into their work, which would result in lower firm profit. Since firms are profit maximizers, they want to make sure effort stays intact

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20 and thus firms do not lower wages (Fehr & Falk, 1999). This phenomenon suggests that a wage decrease elicits a behavioral reaction to that decrease, namely a decrease in effort.

Previous research by Kahneman et al. (1986) suggests that the reaction to a wage decrease might not be the same in every situation because social norms about value appropriation are not the same for every situation. The reaction to a wage decrease might be different when the firm is losing money compared to when the firm is profitable. Namely, people seem to find it acceptable for firms to protect themselves from losses, even when their employees suffer from the firm’s actions to protect positive profit (Kahneman et al., 1986). This implies that it is seen as acceptable to lower wages when the firm is losing money. However, when the firm is profitable, a wage decrease is seen as an exploitation of market power of the firm, and thus not acceptable (Kahneman, et al., 1986). The profitability of the firm thus seems to influence the way a wage decrease is perceived by employees.

The Ultimatum Game shows that when a selfish move is made by the Proposer in the form of an unequal division of money, a punishment often follows from the receiver, namely rejecting the offer (Thaler, 1988; Fehr & Falk, 1999). The wage decrease while the firm is making money is seen as not acceptable and thus a very selfish move of the firm. Because the firm is profitable, it could be seen as more unequal division of value than when the firm is losing money. Employees might react to this selfish action of the firm with stronger punishment than when the firm is losing money. Thus, the behavioral reaction to the wage decrease might be different when the firm is losing money compared to when the firm is making money. This reasoning leads to the following hypothesis:

H1: Profitability of the firm has a negative effect on effort: When the firm is profitable, effort is lower than when the firm is losing money.

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21 The difference in behavioral reaction to the different levels of profitability can be explained by the existence of social norms (Kahneman et al., 1986). When prevailing social norms are violated, perceptions of unfair treatment could be triggered (Kahneman et al., 1986, El Haji & Stoelhorst, 2010). Whether a wage decrease is evaluated as unfair seemed to depend on the profitability of the firm. Research shows that a wage decrease is seen as unfair when the firm was profitable and generally fair when the firm was losing money (Kahneman et al., 1986; El Haji & Stoelhorst, 2010). Furthermore, when employees feel treated fairly, the amount of effort they put into their work stays intact, however when perceptions of unfair treatment arise, effort of employees will decrease (Fehr & Falk, 1999, El Haji & Stoelhorst, 2010). These findings suggest that fairness perception about the wage decrease mediate the relation between profitability of the firm and effort. This reasoning leads to the following hypothesis:

H2: The negative effect of profitability of the firm on effort is mediated by fairness perception.

3.1.2. The moderator nature of work

Generally, when firms lower wages, social norms are violated, and perceptions of unfair treatment are triggered (Kahneman et al., 1986; El Haji & Stoelhorst, 2010). However, the effect of a wage decrease on fairness perceptions seems to be moderated by the nature of work, due to the different sets of social norms that are associated with the different types of work. When knowledge input into the employees work was made explicit, a more nuanced set of social norms about fairness seemed to arise (El Haji & Stoelhorst, 2010). Namely, when employees knowledge inputs in the development of products was made explicit, decreasing wages was perceived as unfair to a larger extend than when knowledge input was not made explicit (El Haji & Stoelhorst, 2010). This difference could be explained by the existence of

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22 moral property rights (Oxoby & Spraggon, 2008). Moral property rights give an employee entitlement on the residual claim of the value that is created by a product or idea. Thus, if the developed good creates value for the firm, the creator of that good may feel that he or she has an earned a right to that value. Because knowledge workers put more of their own knowledge and ideas into products that the firm produces than traditional workers, it may be assumed that moral property rights are more present for knowledge workers than for traditional workers.

This reasoning is strengthened by research in experimental economics (Oxoby & Spraggon, 2008; Gächter & Riedl, 2002). Oxoby and Spraggon (2008) argue that moral property rights influence fairness perceptions about the division of value. This is shown in a variation of the Dictator Game, in which a substantially higher amount of money is allocated to the Receiver when he had ‘earned’ the money by making a test. A substantial lower amount of money, a zero offer, is made when the Dictator earned the endowment by making the test.

Gächter and Riedl (2002) also studied a version of the Dictator Game and show how moral property rights influence the perceived fairness of division of value. The results show that a better intellectual performance than another person gives a perceived right to a larger part of the whole, and thus a larger reward than the other person. These economic experiments imply the existence of a social norm of moral property rights, namely when intellectual input from a person leads to certain outcomes, that person is perceived as entitled to the outcome.

The existence of moral property rights would suggest that decreasing wages of knowledge workers is perceived as unfair, because the employee is entitled to the value he or she creates. However, in the case of traditional workers, work is not intellectual in nature, so moral property rights would not arise.

As already pointed out, the effect of a wage decrease on fairness perceptions seems to be dependent on the profitability of the firm. A wage decrease is seen as unfair when the firm was profitable, but in general fair when the firm was losing money. The social norm that

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23 seems to be present here is that the firm should not exploit her market power at the expense of the employee, unless it needs to protect herself against losses (Kahneman, et al., 1986). However El Haji and Stoelhorst (2010) found that decreasing wages of knowledge workers is perceived as unfair, regardless of the profitability of the firm. Namely, when employees perceive moral property rights, they feel they deserve the value they create for the firm. This means that even when a firm is losing money, it is not accepted to protect herself against losses, at the expense of knowledge workers. Moral property rights thus seem to exist regardless of the profitability of the firm. Knowledge workers seem to be less influenced by profitability of the firm, whereas decreasing wages of a traditional worker would be evaluated as unfair when the firm is profitable, but somewhat fair when the firm is losing money. This suggests that the relation between profitability of the firm and fairness perception would be stronger for traditional workers than for knowledge workers. Namely, the fairness perception about a wage decrease is more influenced by profitability of the firm in the case of traditional workers, whereas the fairness perception of knowledge workers would remain negative irrespective of the profitability of the firm. This reasoning leads to the following hypothesis:

H3: The negative relation between profitability of the firm and fairness is moderated by nature of work in such a way that the relation between profitability of the firm and fairness perception is stronger for traditional workers than for knowledge workers.

Nature of work is expected to play an additional role in the relation between value appropriation and value creation. As already discussed in hypothesis 2, fairness perceptions are expected to affect employee effort. Research about the impact of fairness perceptions suggests that when employees feel treated unfairly, their effort decreases (Fehr & Falk, 1999; Kahneman, Knetsch and Thaler, 1986; El Haji & Stoelhorst, 2010). However, I expect the

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24 nature of work to affect the extent to which the employee will decrease effort. This might be assumed because of differences in completeness of contracts and salience of effort (Fehr & Falk, 1999; Altmann et al., 2010). Labor contracts for traditional workers are more complete than contracts for knowledge workers (Altmann et al., 2010; Molleman & Timmerman, 2002). Traditional workers have clearly defined tasks and responsibilities. For example, a factory worker is supposed to perform a set of precisely described tasks, with a concrete quantitative and qualitative target. Because these demands are clearly defined in the contract and performance on these demands can be measured, the contract can be easily enforced by the firm (Altmann et al., 2010; Molleman & Timmerman, 2002). However, knowledge workers have less specific task descriptions and targets, because their tasks and responsibilities are complex and interdependent. It is thus more difficult to set clearly defined targets in a contract for knowledge workers (Altmann et al., 2010; Fehr & Falk, 1999). The firm can enforce an incomplete contract less effectively, so there is more room for knowledge workers to lower their effort without being punished, whereas in the case of traditional workers, the more complete contract contains clearly defined tasks that must be followed. Otherwise the employee suffers the risks of negative consequences of contract enforcement (Altmann et al., 2010). These negative consequences could for example be losing bargaining power, losing the job or another wage reduction. Thus, completeness of contracts can influence the risk of negative consequences of lowering effort. The risk of being punished would be greater when contracts are complete. That is why I expect that the tendency to reduce effort is lower for traditional workers, who have contracts that are relatively complete, than for knowledge workers, who’s contracts are relatively incomplete.

Complexity of work also has consequences for the salience of effort. For traditional workers, an effort decrease is visible for the firm, since the difference in outcome is easily observed (Fehr & Falk, 1999). However, for knowledge workers it is difficult to monitor and

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25 measure whether their effort is optimal because tasks are complex, specialized knowledge is involved and processes partly take place in the minds of employees. It is therefore difficult to assess what knowledge workers are doing precisely, with the result that effort is less salient in the case of knowledge workers (Fehr & Falk, 1999). It can be assumed that the tendency to take advantage of employers is greater for knowledge workers than for traditional workers, because their decrease in effort is less visible and thus they have less risk of negative consequences taken by the firm.

Thus, the firm has less control over the effort of knowledge workers than over the effort of traditional workers, because contracts of knowledge workers are less complete and effort of knowledge workers is less salient. This is why I would expect the relation between fairness perceptions and effort to be stronger for knowledge workers than for traditional workers, and it is thus reasonable to assume that when social norms are violated, it is likely that knowledge workers lower their effort to a greater extent than traditional workers. This reasoning leads to the following hypothesis:

H4: The relation between fairness perception and effort is moderated by nature of work, in such a way that the relation between fairness perception and effort is stronger for knowledge workers than for traditional workers.

3.1.3. The moderator social value orientation

I expect that personality also moderates the effect of fairness perceptions on effort. The effect of value appropriation on fairness perceptions seems not to differ for individualists or prosocials. This is shown in the Ultimatum Game, in which judgments of fairness of an offer is not effected by SVO (Mellers et al., 2010).However, the decision in acceptance of an unfair offer does differ for individualists and prosocials (Karagonlar & Kuhlman, 2013).

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26 Thus, I expect the behavioral reaction to fairness perceptions to be influenced by social value orientations (Diekmann, Soderberg & Tenbrunsel, 2013; Karagonlar & Kuhlman, 2013).

The behavior of individualists depends on maximizing their own outcomes. Individualists thus make a strategic decision about to what extent they decrease effort in response to a wage decrease. They have little or no concern with the outcomes of others, in this case, the firm (Karagonlar & Kuhlman, 2013). I would expect that individualists lower their effort, in order to compensate for the decrease of wage. However, not to the extent of risking punishment by the firm, because punishment would mean an even more negative outcome for the individual. This strategic consideration is shown in the Ultimatum Game, in which individualists tended to make equal offers, only when they had reason to fear that recipients would reject a low offer (Karagonlar & Kuhlman, 2013). Thus, individualists would make a strategic decision in order to benefit themselves, regardless of the fairness perception.

Prosocials do have concern for others and try to maximize joint outcome (De Cremer & Van Vugt, 1999), however these cooperative behaviors are conditional. Prosocials may react to unfair treatment by becoming uncooperative themselves, in order to enforce social norms. Enforcing social norms can be done by and punishing the firm for violating these norms (Van Lange, 1999). Prosocials may engage in altruistic punishment, as a reaction to the intentional violation of a social fairness norm by the firm (Camerer & Thaler, 1995; Fehr and Fischbacher, 2003). In this view, recipients enforce the norm of fairness by punishing a norm violator, but pay a price for this themselves, namely the risk of losing their bargaining position. When prosocials evaluate a wage decrease as an unfair action of the firm, I expect them to respond with a punishment by decreasing their effort (Karagonlar & Kuhlman, 2013). I expect prosocials to decrease their effort to a larger extent than individualists because they engage in altruistic punishment, whereas individualists make a more strategic decision in

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27 which the employee’s position within the firm is not risked. This reasoning leads to the following hypothesis:

H5: The relation between fairness perception and effort is moderated by SVO, in such a way that in the case of prosocial individuals, the effect of fairness on effort is stronger than in the case of individualists.

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4. Method

This chapter presents the research method and a description of the sample. Furthermore, the operationalization of the independent variable, dependent variable, mediator and two moderators are discussed.

4.1. Research method

In this thesis, a vignette study was used as the method to test the hypothesis. The vignette study was comprised of two components, namely the vignette and an additional survey for measuring perceptions, behavioral intentions and possible confounding factors. Appendix A contains the survey that was used in this study.

A vignette study is a methodological tool that provides a valuable technique for exploring people’s perceptions, beliefs and behavioral intentions about a specific situation (Schoenberg & Ravdal, 2000). A vignette presents a hypothetical situation, to which research participants respond, thereby revealing their perceptions, values, social norms and impressions of the specific scenario (Finch, 1987). These perceptions are measured by the questions that are asked after the vignette is presented. Additional information can be asked for the purpose of controlling for certain confounding factors. An advantage of the vignette study is that it combines this element of survey research with elements of experimental research. Namely, by systematically varying the levels of the vignette characteristics, variables can be manipulated while other factors stay constant (Atzmüller& Steiner, 2010). A second advantage of a vignette is that, when the vignette is carefully constructed, it can somehow resemble a real life experiences, which can elicit perceptions and beliefs (Schoenberg & Ravdal, 2000).

In this thesis, fairness perceptions and behavioral intentions about certain situations

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29 employees are decreased, previously used in the research by Kahneman et al. (1986). In this situation the owner of the firm chooses to decrease wages as a reaction to unemployment in the labor market. Because of unemployment, the owner of the firm would be able to hire similar performing individuals for a lower wage, and therefore adjusts the wages of the current employees to their relative bargaining position. The owner decreases the wages of the employees. The effect of this wage decrease on fairness perceptions, under different circumstances, was measured. Fairness perceptions about this wage decrease under various circumstances were researched. In addition, the effect of the wage decrease on the behavioral intention effort of employees was measured. Because the vignette study provides a valuable technique to research perceptions and behavioral intentions, this method was used to research the hypotheses.

4.2. Sample

A sample of 200 participants was needed, because in every cell of the two-by two factorial design the amount of 50 participants was desirable. The sample used for analysis consisted of 216 participants, who were mainly students and employees in the Netherlands. The sample was a convenience sample, which was taken because of the combination of restricted time and access to a more representative sample of the working population. Friends, family, colleagues, fellow students and acquaintances were contacted via email and social media. They were asked to participate and spread the survey to their friends and relatives. The survey they received was created in Qualtrics and the data was gathered via Qualtrics.

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4.3. Operationalization

De operationalization of the variables is discussed in this subsection. The independent variable and one of the moderators were manipulated in the vignette. A manipulation check was constructed to test the manipulation. Furthermore, operationalization of the dependent variable, mediator, second moderator and control variables are discussed.

4.3.1. Vignette design: Independent variable and moderator

The vignette implemented a two-by-two factorial design (Table 1). The independent variable profitability of the firm and the moderator nature of work were manipulated in the

vignette.

Profitability of the firm consisted of two conditions, losing money and making money. The moderator nature of work consisted also of two conditions, traditional worker and knowledge worker. The combination of these conditions resulted in four vignettes, that were randomly assigned to respondents. In each survey, one of the vignettes was included. The vignettes are shown in Figure 3. The italics highlight the part of the vignette that varies across conditions.

The sentence “… you perform well on your job…” was included in order to avoid participants to connect bad performance of the firm (“… the firm is losing money… ”) to the performance of the employee. When this connection would be made, participants may assume the firm is performing bad because of low productivity of the employee, which could make a

Table 1. Two-by-two factorial design of vignettes

Nature of work

Profitability of firm

Knowledge worker Traditional worker

Making money KM (1) TM (3)

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31 wage decrease seem more fairly. In order to avoid this assumption, the sentence was added to all vignettes.

Figure 3. Vignettes MK (1)

Imagine you are working for an innovative company, and you receive an average wage. There is high unemployment in the market, so the owner of the owner of the company could easily replace its employees, including you, with other good employees at a lower wage. Your job is to develop and design the core products for the company. You perform well on your job. The company has been making money. The owner decreases all wages.

LK (2)

…Your job is to develop and design the core products for the company… The company has been losing money…

MT (3)

…Your job is to pack the products at an assembly line… The company has been making money…

LT (4)

…Your task is to pack products at an assembly line… The company has been losing money…

4.3.2. Manipulation check

A manipulation check was included in the study, in order to check whether the manipulated aspects of the vignettes were understood by participants. After presenting the vignette, the effort scale and the fairness question, five manipulation check questions were asked. First question was meant to check whether the manipulation of nature of work was successful. The question asked was: “To what degree did your job within the company ask for

intellectual input?” The question was answered on a 5-point scale, 1 being very low

intellectual input, 5 being very high intellectual input. The second question was asked to check if the manipulation of profitability of the firm was successful: “Was the company

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making or losing money”, which was answered by the options ‘making money’, ‘losing

money’ or ‘I don’t know’. A last question was added: “What did the owners decide to do to

your wage?” Answer options were ‘your wage goes up’, ‘your wage goes down’ and ‘I don’t

know’. Although this was not manipulated in the vignette, it is very important for the situation and should be understood properly.

Furthermore, the question “How easy or hard was it to imagine yourself in the

situation?” was asked. This first question was answered on a 5-point scale: very easy, easy,

easy nor hard, hard and very hard. The question “How realistic did you find the situation?” was also answered on a 5-point scale: very realistic, realistic, realistic nor unrealistic, unrealistic and very unrealistic. If respondents had difficulty imagining themselves in the vignette or found the situation unrealistic, it could be the case that the reported fairness perception and effort would not match the reaction of the participant in a real life situation.

4.3.3. Dependent variable

The dependent variable in this research was effort. The scale to measure effort existed of six statements (Figure 4). After reading the vignette, the respondents were asked to react on these statements by reporting how likely or unlikely it is that they would behave according to the statement. This reaction was scored on a five-point Likert scale: very unlikey, unlikely, likely nor unlikely, likely and very likely. The statements are based on three articles that all measured effort in some way (Williams & Anderson, 1991; Spector et al. 2006; Brockner et al., 1992). Statements 1, 2 and 6 were derived from an instrument by Williams and Anderson (1991), statement 3 comes from a scale by Brockner et al. (1992) and statement 4 and 5 were derived from an effort scale by Spector et al. (2006). In the first three questions, several aspects of effort were covered, namely reaching minimum job requirements, job productivity,

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33 and accuracy. The last three questions were reverse coded items, and thus contained descriptions of negative effort.

An extra dependent variable was used to conduct an additional analysis. This variable, effort change, was used to analyze to what extent and in what direction participants would

change their effort after the wage decrease. The question that was asked was “How much effort would you put into your job after this wage decrease?” There were 5 answer options:

much less effort, less effort, same effort, more effort and much more effort.

Figure 4. Effort scale

In this situation, how likely would it be that you would behave as follows:

1. I make sure to perform the tasks that are expected of me. (Williams & Anderson, 1991) 2. I try to work as hard as possible (Brockner et al., 1992) 3. I try to complete the tasks that assigned to me as well as possible. (Williams & Anderson, 1991) 4. I purposely work slowly when things need to get done. (Spector et al., 2006) 5. I purposely do my work incorrectly. (Spector et al., 2006) 6. I take undeserved work breaks. (Williams & Anderson, 1991)

4.3.4. The mediator fairness perception

The mediator in this thesis was fairness perception. Fairness perception was measured with the question: “How fair or unfair do you consider this wage decrease?”. Participants were asked to evaluate their fairness perception of a situation on a five-points Likert scale, scored as very unfair, unfair, fair nor unfair, fair and very fair.

4.3.5. The moderator social value orientation

Social value orientation (SVO) was measured in the survey by presenting participants the SVO Slider (Murphy, Ackermann & Handgraaf, 2011). In the SVO Slider, different

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34 divisions of value between the participants and an unknown person were shown. The participants had to select the division of value that he or she preferred. The primary six items made it possible to distinguish four categories of people, namely altruists, prosocials, individualists and competitors (Murphy et al., 2011). It is common practice in SVO research to combine individualists and competitors into a single group. This practice is to some degree justified by research, showing that individualists and competitors have a common non-cooperative tendency, leading them to behave quite similarly in social dilemmas(Van Lange & Kuhlman, 1994; Karagonlar & Kuhlman, 2013). Although the score on social value orientation can divide a sample into categories, it is also used as a continuous scale. In this research, the continuous scale is used to see whether social value orientation functions as moderator. When the data analysis asked for categories, namely when an interaction effect had to be plotted, individualists and competitors were combined into one group.

4.3.6. Control variables

Several additional questions were asked in order to control for 7 factors. Firstly, gender was asked in order to control for unintended effects of gender. Research indicates that the social value orientation of males and females may differ. Females are generally more concerned for the well-being of others, whereas males are more competitive and more concerned with material benefits (Sidanius, Pratto, & Bobo, 1994). Furthermore, the age of participants was asked because prosocial judgment seems to increase with age (Eisenberg et al., 2005). The largest increase found place during the late adolescence into the early 20s (age 17–22), and either levelled off or declined slightly (Eisenberg et al., 2005). Research by Van Lange et al. (1997) also suggests that cooperative behavior is related to age. They found that cooperation increases most strongly between the ages 15 to 29 years of age (Van Lange et al., 1997). Thus, age could be related to the amount of effort participants are willing to put into their jobs. Furthermore, nationality was a control variable in the study. People with different

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35 ethnic backgrounds possess different attitudes, values and norms that are in line with their culture (Cox et al., 1991; Hofstede, 1980). In a study of value differences in 40 nations, Hofstede (1980) found that individualist-collectivism has a great influence on work goals and priorities. Cross-cultural studies have shown that Northern and Western Europeans and North Americans tend to be individualists and Asians, Latins and East and West Africans tend to be collectivists (Hofstede, 1980). Participants with different nationalities might thus differ in social value orientation and fairness perception.

Some other factors could influence the results and were used as control variables. Participants were asked to report their education level, this could be primary school, secondary school, vocational education (MBO), college (HBO), or university. The education level could influence the results because it might be that participants with a high education level had trouble imagining themselves as a traditional worker, and vice versa. For the same reason, the education level for the longest job the participant had was asked. This could also influence the extent to which the participant were able imagine themselves in the vignette.

Whether participants were employed, had their own business, were unemployed or student could influence the extent to which they could imagine themselves in the situation. For example, it could have been easier for employees to imagine themselves in the situation that was described in the vignette, because of their experience as an employee. For this reason, employment status was asked. For the same reason, the amount of years of work experience was originally asked, but this question was not asked in the correct format in the Qualtrics survey. The consequence was that this control factor could not be included in the analysis.

Moreover, the study area of participants was asked. Individuals with an education in economics or business could be more individualistic than people with social backgrounds, because they have learned how to reason economically (Triandis, Chen & Chen, 1998). Law

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36 students are also expected to have a more individualistic social value orientation. Whereas individuals interested in social sciences may be more concerned with well-being of others, and as a result be more cooperative. To control for study area it was asked whether participants have a background in business and economics, law, another study or no study background.

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5. Results

In this chapter, the results of the statistical analysis are presented. First, a reliability analysis of the effort-scale is presented, because this variable was measured through a multiple-item scale. Next, results of the manipulation check are shown, followed by descriptive statistics, correlations and a normality analysis. Finally the regression analysis, which was performed for the purpose of testing the hypotheses, is presented.

5.1. Reliability

The scale that was used to measure effort had a good internal consistency with a Cronbach’s alpha coefficient of 0.831, which is higher than the acceptance level of 0.7. This indicates that the items were proved to be internally consistent and the scale was a valid measurement instrument for measuring effort. For all items, the corrected total item correlation was higher than 0,3. This means each items measured the same construct as other items. All “Cronbach’s alpha if item deleted” were lower than the current Cronbach’s alpha. Thus, all items in the effort scale were justified.

5.2. Manipulation

The number of respondents that completed the survey was 272. The respondents received one of the four scenarios, they were randomly assigned and divided. The division of scenario’s between the included respondents are shown in Table 2.

Table 2. Division of participants over vignettes

Total Excluded Included

Scenario N % N % N % Vignette 1 (KM) 71 26.1 13 18.3 58 81.7 Vignette 2 (KL) 65 23.9 16 24.6 49 75.4 Vignette 3 (TM) 70 25.7 14 20.0 56 80.0 Vignette 4 (TL) 66 24.3 13 19.7 53 80.3 Total 272 100 56 20.6 216 79.4

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38 Of all respondents, 56 (20.6%) respondents were excluded from the analysis. This was decided on the basis of the manipulation test. On the question “What did the owner decide to do with your wage?” answered 95.2% of the respondents correctly, meaning in line with the vignette. On the question “Was the company making or losing money?” answered 86.8% with the correct response (88.7% in making money condition and 84.7% in losing money condition). The respondents that did not answer these questions correctly were excluded from further analysis (Table 3). The question “To what degree did your job within the company ask for intellectual input?” had to be answered on a 5-points scale, and the success of the manipulation was thus less arbitrary. Respondents that were in the knowledge work condition were excluded when they gave the answer 1 or 2, which corresponded with low intellectual input. Respondents in the traditional work condition were excluded when they answered 4 or 5, which corresponded with high intellectual input. In total, 92.6% (89.0% for knowledge workers and 96.3% for traditional workers) of the respondents met the set criterion for nature of work and were thus included in the analysis. After excluding the 56 participants from analysis, an independent samples t-test was performed to check whether the manipulation of nature of work was successful. The mean of intellectual input was significantly higher in the case of knowledge workers (M= 1.28) than traditional workers (M = 3.81), t(214) = -30.88, p <.001). Thus, the manipulation of nature of work seemed to be successful.

Table 3. Manipulation check

N %

Wage decrease Incorrect 13 4.8

Correct 259 95.2

Profitability Incorrect 36 13.2

Correct 236 86.8

Nature of Work Incorrect 20 7.4

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39 The question how easy or hard it was for the respondents to imagine themselves in the situation was assessed with an independent samples t-test (Table 4). For the imagine-question, there was no significant difference in responses between the conditions “knowledge worker” and “traditional worker,” t(214) = .366, p = .715, and on the realistic-question and there was also no difference for nature of work, t(214) = .252, p = .801. This means the different scenario’s of nature of work were seen as equally easy to imagine and were scored as equally realistic. However, for the conditions of profitability, the mean scores on the imagine question were significantly different, t(214)= -2.55, p < .05. The scores on the realistic-question also differed significantly for these conditions t(214) = -2.86, p < .01. The scenario in which the firm was making money was harder to imagine and was scored less realistic than the scenario in which the firm was losing money. This result indicates that the scenarios of profitability of the firm were remembered but may not have been imagined properly to the same extent.

5.3. Descriptive statistics

In this study, two categorical variables were involved in the hypothesis, namely the moderators nature of work and profitability of the firm. Furthermore, SVO was categorized for the purpose of plotting a possible interaction effect. A description of these variables is

Table 4. Manipulation check questions: Imagine and realistic

Question Variable Condition Mean SD

Imagine Nature of work Traditional worker 2.68 .91

Knowledge worker 2.63 .82

Profitability Losing money 2.50 .88

Making money 2.80 .84

Realistic Nature of work Traditional worker 2.46 .84

Knowledge worker 2.43 .84

Profitability Losing money 2.28 .78

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40 presented in Table 5 (Appendix B). Of all respondents included in the analysis, 52.8% had to imagine being a knowledge worker and 47.2% of the respondents received the scenario with traditional work. The scenario’s winning and losing money were divided among respondents, 49.5% of the respondents received the making money variant and 50.5% the losing money variant of the vignette. With regard to the categorized moderator SVO, 74.5% percent of the respondents were reciprocals and 25.5% self-regarding individuals.

In Table 6, descriptive statistics of the continuous variables are shown. The variables that were central to the hypothesis were the dependent variable effort, the mediator fairness perception and the moderator SVO value. Furthermore, the continuous variable effort change was used in an additional analysis. As shown in Table 4, the dependent variable effort ranged from 1.81 to 5, with a mean of 4 (SD = 0.61). Given the negative skewness (-.53) and positive kurtosis (.42), the scores were clustered to the right and the distribution was relatively peaked. The mediator fairness perception ranged from 1 to 5, with a mean of 2.26. The positive skewness (.17) and negative kurtosis (-.47) indicates the scores were clustered to the left and the distribution was relatively flat. With regard to the moderator average SVO value, the minimum was -16.26 and the maximum 45.89, with an average of 28,46 (SD=.55). The negative skewness (-1.07) and positive kurtosis (.47) show that the scores were clustered to the right and the distribution was relatively peaked. The scores on the additional variable effort change ranged between -2 and 1, with a mean of -0.3 (SD = 0.55). The negative skewness (-.50) and positive kurtosis (.16), show that the scores were clustered to the right and the distribution was relatively peaked.

Furthermore, several demographics and other general information were asked, in order to control for these variables. These continuous and categorical control variables are discussed. The age of the respondents ranged from 17 to 67, with an average age of 27 (SD=10.75). The variable was clustered to the left (skewness = 2.22) and the distribution was

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41 rather peaked (kurtosis = 3.79). Furthermore, the sample consisted of 33.3% males and 66.7% females. A large majority of the respondents was Dutch, namely 95.5%. The education level of the respondents was relatively high, namely 52.8% studies or studied at university level and 13.9% at college level. Only 2.8% of the respondents indicated their educational level to be vocational education, 29.2% secondary school and 0.5% primary school. With regard to the area of study, 20,8% of the respondents had a background in business or economics and 8.3% in law. The remaining 66.7% another backgrounds. The majority of the respondents had the employment status student, namely 67.6%. Furthermore, 25.0% was employed, 5.6% owned a business and the remaining 1.8% was unemployed. The education level that was necessary for the job a respondent had for the longest time was for 32.9% secondary school, 22.7% college, 20.4% university, 13.0% vocational education and 5.0% primary school. A small amount of 3.2% reported not to have any work experience.

Table 6. Descriptive Statistics Continuous Variables

Variable _N _Mean _SD _Minimum _Maximum _Skewness _Kurtosis

Research Variables: Effort 216 4.00 0.61 1.83 5.00 -.53 .42 Fairness perception 216 2.26 0.92 1.00 5.00 .17 -.47 SVO 216 28.46 11.98 -16.26 45.89 -1.07 .47 Effort Change ₂₁₆ _-0.30 _0.55 _-2.00 _1.00 -.50 .16 Control Variables: Age ₂₁₆ _26.94 _10.75 ₁₇ ₆₇ 2.22 3.79

Before further analysis was conducted, several categorical variables were transformed into dummy variables. The control variables nationality, education level, study area, employment status and education level necessary for longest job were each recoded into two levels. The values for the dichotomous variables are shown in Table 7.

‘Education level’ as well as ‘education level necessary for longest job’ were divided into the two levels lower and higher, in which the category higher education contained college (HBO) and university. Study area was divided into two categories. Although business and law

Value appropriation and value creation : fairness perceptions of knowledge workers and traditional workers