From value appropriation to value creation : differences between knowledge workers and traditional workers

From Value Appropriation to Value Creation:

Differences between Knowledge Workers

and Traditional Workers

Behavioural Strategy

Student: Robin van den Akker 10663606

Master Business Studies: Strategy Supervisor: Dr. ir. J.W. (Jan-Willem) Stoelhorst

University of Amsterdam, Faculty of Economics and Business Date: 1st

Table of Contents

2.4 Effect of value appropriations on effort ... 13

2.5 Effect of value appropriation on fairness ... 14

2.6 Effect of fairness perceptions on effort ... 14

2.7 Fairness perceptions and personality types ... 15

2.8 The gap ... 16 3. Theoretical framework ... 18 4. Research design ... 26 4.1 Method ... 26 4.2 Vignette design ... 27 Manipulation checks ... 28 4.3 Data collection ... 29 4.4 Operationalization ... 29 Dependent variable ... 29 Mediator ... 30 Moderators ... 30 Control variables ... 31 5. Results ... 33 5.1 Manipulation checks ... 33 5.2 Descriptive statistics ... 33

5.3 Recoded variables ... 36

5.4 Reliability analysis ... 37

5.5 Normality analysis ... 38

5.6 Correlation analysis ... 38

5.7 Differences between vignettes ... 42

5.8 Regression analyses ... 43

Direct effect on Effort ... 43

Mediator: fairness perceptions ... 45

Moderating effect 1: type of work (between wage and fairness perceptions) ... 47

Moderating effect 2: type of work (between fairness perceptions and effort) ... 49

Moderating effect 3: SVO ... 51

Additional analysis: SVO categorized ... 53

6. Discussion ... 55

6.1 Main findings ... 55

6.2 Limitations and suggestions for further research ... 58

6.3 Conclusion (especially about motivating knowledge workers) ... 61

Reference list ... 63

Appendix 1: Questionnaire ... 67

Appendix 2: Normality check ... 73

Abstract

The aim of this research was to study the relationship between value appropriation and value creation. More specifically, this study strived to define whether this relationship is mediated by fairness perceptions and if this is moderated by type of work (knowledge-intensive or traditional work) and social value orientations (self-regarding or prosocial people). This is the first time a study combined these five topics, which makes it of theoretical relevance. Moreover, this study is also of practical relevance. Owners of firms can use the results of this study to make choices about employee’s payments, in order to let their employees feel that they are being treated well by their firm. This will make employees more motivated, and as a result are willing to put more effort in their jobs. I expected there to be a positive relationship between a wage increase and effort, and that this relationship was mediated by fairness perceptions. In addition, I expected that the positive relationship between a wage increase and fairness perceptions was stronger for knowledge workers. Finally, I expected the positive relationship between fairness perceptions and effort to be stronger for knowledge workers or prosocials. A vignette experiment was conducted in order to test the abovementioned relationship empirically.

Data for this study were obtained by an online questionnaire. Respondents (N = 196) received one out of four vignettes. This online questionnaire was sent to relatives, friends, (old) classmates etc. and was put on Facebook and LinkedIn, as a result, convenience and snowball sampling were used. The average age of the respondents is 29.21, and almost all respondents are Dutch (90.3%). Furthermore, almost half of them are students (43.9%) and 86.2% completed higher education.

The results show that there is a positive relationship between a wage increase and effort. This relationship is fully mediated by fairness perceptions. Contrary to what was expected, the relationship between a wage increase and fairness perceptions are negatively moderated by the type of work. This could indicate that, due to the entitlements, knowledge workers feel that they are already entitled to the extra profit the firm is making and see the increase of profit as their receivings. In other words, knowledge workers do not perceive the wage increase as being more fair, unlike traditional workers who do perceive a wage increase as more fair. Further research should verify if this is indeed the case. To conclude, the results did not support my expectations that the relationship between fairness and effort is moderated by type of work or SVO. Further research can be done to test if there are other mechanisms which do moderate this relationship.

1.

Introduction

According to the resource-based view (RBV), performance differences among firms arise because of

the characteristics of resources (Barney, 1986; Barney, 1991; Peteraf, 1993). This view argues that if a

resource is valuable, rare, inimitable and non-substitutable a firm should have a sustainable

competitive advantage over its competitors (Barney, 1991). However, in the 90’s, researchers

became interested in the new knowledge economy (Bang, Cleemann, & Bramming, 2010). Bang e.a.

(2010), referring to Drucker's (1993) research, describes that the characteristics of value creation in

the new world are nog longer that of land, capital and labour, but instead, the main producers of

wealth have become information and knowledge. Following Drucker’s insights, our economy has

been in transition, moving away from a material based to an immaterial based economy (Bang e.a.,

2010). According to Bang e.a. (2010), the shift from land, capital and labour to information and

knowledge, poses significant challenges for the creation of value. The main reason for this is that

information and knowledge, being immaterial economic resources, cannot be treated in the same

way as material economic resources such as land, capital and labour, because they are not

productive in and of itself (Drucker, 1993 in Bang e.a., 2010). Despite the above, knowledge can

become a great source of competitive advantage and create value for a firm, if owners make sure

that employees are motivated to behave in line with the firm’s interests Therefore, not only land,

capital and labour, but also knowledge can become a source of competitive advantage. Knowledge

can create value for the firm, but owners should make sure that employees are motivated to behave

in line with the firm’s interests (Gottschalg & Zollo, 2007). “Knowledge workers” are different from

traditional workers, due to the fact that firms depend on the intellectual contributions of those

knowledge workers. Knowledge workers are people who are engaged primarily in developing and

using information and knowledge in order to enable the production of goods or services, e.g.

consultants, product developers or lawyers. Knowledge work is information-based, whereas

traditional work is material-based. Traditional work consists of converting materials from one form

of this dependency of the firm is that it is especially important to take the motivation of knowledge

workers into account because they, as Coff (1999) states, are likely to have a strong bargaining

position, since they are difficult to replace and because they can benefit from information

asymmetry (Coff, 1999). Productivity for most knowledge work cannot be defined, let alone

measured (Bang e.a., 2010), therefore, it is hard to measure and define what the actual value created

is and by which employee, and as a consequence it is also hard to appropriate the value fairly by the

firm.

As mentioned before, knowledge can become a source of competitive advantage. In order to

achieve this advantage, knowledge-based firms (where knowledge workers provide the value

creation) should find a way to manage their human resources since these cannot be managed the

same as their non-human resources. Managers and owners need to understand what motivates their

employees, to make sure their employees put the highest effort possible in their jobs, and because of

that, receive a higher firm performance. Therefore, in order to explain differences in performance

between firms, one should not only look at valuable, rare, inimitable, non-substitutable resources, as

the RBV pledges. Rather, one should also keep human resources and therefore motivation

mechanisms, e.g. payment regulations in order to motivate employees, in mind. Only then the

relationship between value appropriation (the division of value created, e.g. payments to employees)

and value creation can be truly understood (El Haji & Stoelhorst, 2010).

As mentioned before, to create value out of human resources it is important for a firm to

have motivated employees. According to some researchers, all individual stakeholders value fairness

and will therefore be more motivated to create value for their firm, if they feel they are treated fairly

by it (Bosse, Phillips, & Harrison, 2009; Harrison, Bosse, & Phillips, 2010). In other words, fairness

perceptions are seen as being connected with the willingness to create value for the firm in the

future. El Haji & Stoelhorst (2010) found evidence that knowledge workers have different fairness

perceptions than traditional workers, (e.g. line workers), which could mean that they value actions of

value appropriation differently than employees who do traditional work, it is possible that the

knowledge workers will put a different, lower, level of effort in their work, and as a consequence,

create less value for the firm. If that is indeed the case, owners should make different choices about

value appropriation, about the payments, for knowledge workers than traditional workers.

Another difference in motivations to create value can be made between different personality

types. People have different personality types and, as a consequence, react differently to actions and

treatments of the owner or manager. Managers and owners should be aware of these differences

and understand how these types will react, in order to manage them so that they will create the

most value for the firm. According to Bridoux, Coeurderoy, & Durand (2011), a distinction can be

made between prosocials and self-regarding people. Each of these personality types has different

perceptions about what is fair and what is unfair and, in line therewith, may have different levels of

willingness to create value for the firm depending on value appropriation decisions.

This aim of this research is to study the possible relationship between value appropriation

and the willingness to create value for the firm. More specifically, this study strives to define whether

this relationship is mediated by fairness perceptions and if this differs between knowledge and

traditional workers, and between different personality types. A vignette experiment will be

conducted in order to test the abovementioned relationship empirically. A vignette is a hypothetical

story, which highlight selected parts of the real world, in order to uncover individuals’ perceptions,

beliefs and attitudes.

The results of this study can be used by managers and owners (who are also managing the

firm, instead of only own the firm, i.e. shareholders) to become aware of how employees value their

choices about payments and use it to make choices about value appropriation, in order to keep their

employees motivated.

The next chapter provides an overview of the existing literature, which ends with the

research question of this study. The theoretical framework is described in the third chapter and it

describes the research design. The actual experiment is conducted and its results are presented in

2.

Literature overview

This chapter will give an overview of the existing literature about value creation, knowledge workers,

owners’ choices, the effort of value appropriation on effort and fairness perceptions, the effect of

fairness perceptions on effort, and fairness perceptions and personality types.

As already mentioned in the introduction, prescriptions to increase firm performance in the

RBV, tend to focus on the acquisition and management of strategic resources and capabilities (Coff,

1999). Knowledge-based assets are especially promising because they are hard to imitate (Coff,

1999). At the same time, people with critical knowledge may also have enormous bargaining power

about the value appropriation, i.e. about their payments (Coff, 1999). Furthermore, an owner cannot

measure exactly how much value a knowledge worker has created for the firm. For that reason, Coff

(1999) made a distinction between value appropriation and value creation. According to Coff (1999),

the RBV ascribes most rent to knowledge that is embodied in individuals, because knowledge is in a

persons’ head, therefore you cannot separate it from an individual. It follows that many employees,

in addition to shareholders, will have a claim over the rents they generated (Coff, 1999). Hence, Coff

(1999) mentioned that performance is an outcome of a two-stage game: rent generation is the first

stage, and rent appropriation is the second stage. Consequently, firm performance cannot be

predicted if our theory only speaks to the first stage, which the RBV does according to Coff (1999). To

understand firm performance better, you have to take both stages into account, which is what this

study will do.

2.1 Value creation

Resources can create value for the firm, especially human resources are important. However, these

human resources cannot be owned or controlled like you do with non-human resources. Coff (1999)

mentions that it is inappropriate and unrealistic to assume that firms can actually own

knowledge-based assets. It is impossible to know how much knowledge a person has, because knowledge is a

resource locked in the human mind. It is possible people will keep their knowledge for themselves,

(1999) notices that the RBV requires a definition of the firm that reflects the complexity of the

underlying resources (Coff, 1999).

Organizations are made up of individuals (Felin & Foss, 2005). Collective value creation

results from coordinated and cooperative efforts undertaken by multiple agents within firms to

exploit the value creation potential of the firms’ resources (Bridoux e.a., 2011). Felin & Foss (2005)

mention you must fundamentally begin with and understand the individuals that compose the

whole, specifically their underlying nature, choices, abilities, propensities, heterogeneity, purposes,

expectations and motivations. Individuals matter and micro-foundations are needed for explanation

in strategic organization (Felin & Foss, 2005).

Accordingly, Bridoux e.a. (2011) also mention that value creation depends not only on the

firm’s resources but also on the motivation of employees to leverage these resources. Employees

need to be motivated to behave in line with the firm’s interests (Gottschalg & Zollo, 2007). Therefore

it is important to take motivation and the willingness to create value into account if you look at firm

performance. Firms need to understand the factors that influence the willingness to create value for

the firm, in order to maximize their performance by human resources.

2.2 Knowledge workers

Knowledge has become a much more important factor of production than natural resources, capital

or low-skilled labour (Drucker, 1992). One of the signs of the transition to a knowledge economy is

the increasing importance of knowledge-intensive firms (Alvesson, 2000). In these firms most work is

of an intellectual nature and well educated, qualified employees form the major part of the

workforce (Alvesson, 2000). According to Alvesson (2000) these firms claim to produce qualified

objects and/or services, using the knowledge of their employees as the major resource. By using

their intellectual input, they create value for the firm. In traditional firms financial or physical capital

dominates, whereas human capital dominates in knowledge-intensive firms (Starbuck, 1992).

As mentioned in the introduction, knowledge workers are different from traditional workers

have a strong bargaining position, are difficult to replace, benefit from information asymmetry (Coff,

1999), and their productivity cannot be truly defined (Bang e.a., 2010). As a consequence of this,

motivating knowledge workers should be different from motivating traditional workers.

El Haji & Stoelhorst (2010) highlighted another aspect of knowledge work. They mention that

it also often takes the form of essentially voluntary contributions to a collective good. It is much

easier for knowledge workers to withhold their best effort than it would be for e.g. a line worker.

Unlike the traditional factors of production, land, capital and labour, knowledge is a resource locked

in the human mind (Kim & Mauborgne, 2003). “Creating and sharing knowledge are intangible

activities that can neither be supervised nor forced out of people. They happen only when people

cooperate voluntarily” (Kim & Mauborgne, 2003). To summarize, it is hard to measure how much

effort knowledge workers have put in their job and how much value is created for the firm by that.

For this reason, it is important to understand what motivates these knowledge workers, so they

cooperate voluntarily in the best interest of the firm, and as a consequence, that the firm receives a

higher firm performance.

2.3 Owners’ choices

Primary stakeholders can influence value creation because they are free to join, stay with, or leave

the nexus of relationships, and because they can contribute more or less to the value creating

activities of the firm with which they choose to associate (Bridoux & Stoelhorst, 2014; Hill & Jones,

1992). Owners and employees are primary stakeholders. However, these two different stakeholders

do not have the same advantages in a firm. Managers or owners (who are also managing the firm,

instead of only own the firm, i.e. shareholders) are in a unique position, because they are at the

centre of the nexus of relationships among stakeholders and make the vast majority of the decisions

that shape the nature of these relationships (Bridoux & Stoelhorst, 2014; Hill & Jones, 1992).

Importantly, managers and owners can influence stakeholders’ value creation by choosing how the

firm treats its stakeholders (Bridoux & Stoelhorst, 2014; Harrison e.a., 2010). This means that it is

influence the willingness of employees to create value for the firm. Owners should know what

motivates their employees, especially in knowledge-based firms, where knowledge workers create

the value for the firm.

2.4 Effect of value appropriations on effort

More researchers, like e.g. Dufwenberg & Kirchsteiger (2000) mention the importance of motivation

within firms. According to Dufwenberg & Kirchsteiger (2000), a job well done takes a motivated

worker. “Employers realize this, and may attempt to influence the working morale of their

employees. One important instrument in this connection is the wage” (Dufwenberg & Kirchsteiger,

2000, p. 1069). They mention that it may be a good idea to pay a high wage if this makes an

employee grateful and prone to work in ways beneficial to the employer, so they will put more effort

in their jobs.

According to Bloom (1999), pay distributions are the array of compensation levels paid for

differences in work responsibilities, human capital, or individual performance within an firm. Firms

generate rent when all stakeholders receive sufficient compensation to hold them in place (pay =

opportunity costs) and some stakeholders get more than would be required to hold them in place

(pay > opportunity costs) (Coff, 1999). A firm that creates ‘more rent’ has a larger surplus of

compensation available for distribution among its stakeholders (Bosse e.a., 2009), which can be in

the form of a wage increase. Cohn, Fehr, & Goette (2008) found evidence that workers put different

levels of effort in their work, in response to payments. They found that workers who felt underpaid

at the baseline wage reacted to a wage increase by raising effort strongly. Workers who felt paid

fairly at the baseline wage did not react at all to the wage increase (Cohn e.a., 2008). Their results

provide clear evidence from a field experiment that the perceived fairness of wages plays an

important role in determining effort (Cohn e.a., 2008).

Heyman & Ariely (2004) did do three experiments about the relationship of payment

increased from low to medium. This indicates that a wage increase will affect the level of effort

employees are willing to put in their jobs.

2.5 Effect of value appropriation on fairness

In 1986, Kahneman, Knetsch, & Thaler (1986b) wrote about value appropriation and fairness

perceptions. In contrast with this study, their study was about wage decreases. The majority of the

respondents found a wage decrease acceptable, when the firm was losing money in a high

unemployment environment where employees are easily replaced (Kahneman e.a., 1986b). But

when the firm was making money, the majority of the respondents thought it was unacceptable to

decrease their wage (Kahneman e.a., 1986b). Their study suggests that many actions that are both

profitable in the short run and not obviously dishonest are likely to be perceived as unfair

exploitations of market power (Kahneman e.a., 1986b).

More studies are done about value appropriation and fairness, like the Ultimatum Game

which is first done by Güth, Schmittberger, & Schwarze (1982). In these games, there are two players.

Player 1 receives an amount of money, and is asked to divide it between him or herself and player 2.

Both players are anonymous. Player 1 does player 2 an offer, and after that, player 2 decides to

accept the offer or not. When player 2 accepts the offer, he or she will receive the amount player 1

offered. But when player 2 rejects the offer, both players receive nothing. Standard economic theory

argues that player 2 will accept every offer, because he or she will accept everything above zero. But

in these ultimatum games, it is shown that when player 2 perceives the offer as unfair, he will reject

the offer, even though he or she receives nothing at all (e.g. Güth, Köningstein, Kovács, & Zala-Mezo,

2001; Güth e.a., 1982; Thaler, 1988). This suggests that people do not act rational all the time and

that there are social norms about the division of value.

2.6 Effect of fairness perceptions on effort

More and more studies notice the need to take into account the complexity of human psychology

(Bosse e.a., 2009; Bridoux & Stoelhorst, 2014; Harrison e.a., 2010). El Haji & Stoelhorst (2010) discuss

that violating social norms about a fair division of value leads to negative fairness perceptions, and

negative fairness perceptions lead to less employee efforts, while, in contrast, positive fairness

perceptions lead to more effort (El Haji & Stoelhorst, 2010).

Some researchers argue that all individual stakeholders value fairness and therefore will be

more motivated to create value, when treated fairly by a firm (Bosse e.a., 2009; Harrison e.a., 2010).

Fair process profoundly influences attitudes and behaviours critical to high performance (Kim &

Mauborgne, 2003). Güth e.a. (2001) found evidence that agents who are favoured by fairness

provide higher effort. It also works the other way around: agents who are disfavoured will provide

lower effort (Güth e.a., 2001).

In addition, Bridoux & Stoelhorst (2014) mention that when employees feel treated unfairly a

small fraction of employees react by engaging in counterproductive work behaviours, such as not

cooperating, stealing, and damaging firm property. So, in fact, there are workers who do not only put

less effort in their work, but also want to punish the firm for treating them unfairly.

2.7 Fairness perceptions and personality types

Bridoux & Stoelhorst (2014) highlight evidence, from both psychology and behavioural economics,

that not every stakeholder acts the same when he or she values fairness, and, as a consequence, has

different motivations to create value. They mention that stakeholders can be classified as either

self-regarding individuals or reciprocators/prosocials (Bridoux e.a., 2011; Bridoux & Stoelhorst, 2014):

reciprocators care about fairness, and self-regarding stakeholders do not. Bridoux & Stoelhorst

(2014) make a distinction between two motivational systems and propose that a fairness approach

(firm’s interactions with stakeholders are based on fairness considerations) is more effective in

attracting, retaining, and motivating reciprocal stakeholders to create value, while an arms-length

approach (interactions are based on bargaining considerations) is more effective in motivating

self-regarding stakeholders and in attracting and retaining self-self-regarding stakeholders with high

motives affect behaviours in collective endeavours such as value creation (Bridoux e.a., 2011;

Bridoux & Stoelhorst, 2014).

Social value orientations (SVO) can be seen as representing differences in how individuals

transform the objective payoffs for themselves and others into a subjective representation of these

payoffs (about what they perceive as a fair or unfair payoff), which forms the basis of individuals’

decisions about how to act (Bridoux e.a., 2011). Kahneman e.a. (1986b) also found a connection

between fairness perceptions and value appropriation: that nominal wage cuts by a firm that is losing

money or threatened with bankruptcy do not violate community standards of fairness, as opposed to

companies who are making money. In the research of El Haji & Stoelhorst (2010), a substantial

majority of respondents believes that employees are entitled to at least their current wage, even if

labour market conditions have changed in ways that reduce employees’ bargaining power. However,

respondents’ reaction changed, when employees’ knowledge inputs into the development of the

firms’ products was made explicit. In these vignettes, respondents deemed a wage decrease unfair,

irrespective of whether the firm profitability was negative or positive.

2.8 The gap

There is a lot of research done about value appropriation, fairness perceptions, personality types,

and value creation. Some researchers also combined (some of) these subjects, with interesting

results. However, with the exception of a working paper by El Haji & Stoelhorst (2010), none of these

studies made a connection with knowledge work. As mentioned before, knowledge work is really

different from traditional work. It is interesting to test if knowledge workers have different fairness

perceptions about value appropriation, due to differences in motivation and perceived entitlements.

Furthermore, knowledge workers may also value fairness differently and, as a consequence, make

other decisions whether to put more or less effort in their jobs. By investigating this interesting topic,

not only theoretical relevance will be obtained, but also practical relevance. The practical relevance is

order to let their employees feel they are treated well by the firm and may want to put more effort in

their jobs.

The research question will be: Does the owners’ choice whether to increase wage or not

influence differences in willingness to create value for the firm, and is this mediated by fairness

perceptions about owners’ choices to increase wage? Is the relationship between owners’ choice to

increase wage and fairness perceptions moderated by type of work (knowledge intensive or not). And

is the relationship between fairness perceptions and willingness to create value for the firm

3.

Theoretical framework

This chapter will discuss the hypotheses to test the research question of the previous chapter and

explains on what theories and arguments these hypotheses are based.

As you can see in figure 1, there are five relationships: one main-effect, one mediator effect,

and three moderator effects. To test all the relations, every arrow is a hypothesis. Therefore, there

will be five hypotheses.

A lot of work is done about lowering wages, fairness perceptions and effort (e.g. Fehr & Falk, 1999;

Kahneman e.a., 1986b), but there are no studies about increasing wages combined with fairness

perceptions and effort. I expect that there is a positive relationship between increasing wages and

effort, which will be verified in this study.

Economists usually assumes that labour is hired as a production factor and should be treated

the same as the production factor capital (Akerlof, 1982). But there is a big difference between

labour and capital. Once a firm hired capital, the firm is free to use it as it wishes, but once the firm

hired labour, management faces considerable restriction on how it can use its labour (Akerlof, 1982).

The firm does not ‘own’ the labour, like they own their capital. The most important restriction is

willingness of cooperation of labour itself: this must be obtained by the firm to make the best use of Figure 1: Conceptual model

the labour services (Akerlof, 1982). The neoclassical theory mentions that firms and employees both

want to maximize their profit and minimize their effort, but, according to Akerlof (1982) this is not

necessarily the case. He talks about “gift-giving”, the determinant of workers’ effort is the norm of

the work group (Akerlof, 1982). On the worker's side, the "gift" given is work in excess of the

minimum work standard; and on the firm's side the "gift" given is wages in excess of what these

people could receive if they left their current jobs (Akerlof, 1982, p. 544). Such “gift-giving” is a

trading relationship, in the sense that if one side of the exchange does not live up to expectations,

the other side is also likely to curtail its activities (Akerlof, 1982). So gift-giving has a reciprocal

nature. According to Bosse e.a. (2009), positive reciprocity occurs when firms offer to pay workers a

wage above their opportunity cost (a ‘gift’) and the workers reciprocate by providing more than their

minimal effort. Persons who work for a firm tend to develop sentiment for that firm; to a great

extent they anthropomorphize these firms (Akerlof, 1982), therefore, they are willing to put more

effort in their work. As a consequence of sentiment for the firm, the workers acquire utility for an

exchange of "gifts" with the firm. The amount of utility depending upon the so-called "norms" of gift

exchange. Dufwenberg & Kirchsteiger (2000) also mention reciprocal motivation. They argue that an

important driving force behind the results concerns reciprocal motivation people desire to be kind to

anyone they conceive of as kind and to hurt anyone who is unkind. As a result, when an employee

receives a high wage, he or she will think of his employer as kind, and that employee is kind in return

by exerting lots of effort (Dufwenberg & Kirchsteiger, 2000). These suggestions result in the following

hypothesis:

• Hypothesis 1: When an owner chooses to increase the wage of the employee, there will be a positive

effect on effort.

I expect that the positive relationship between wage and effort will be mediated by fairness

Economists believe that all behaviour can be explained by assuming that agents make

rational choices, but Güth e.a. (1982) found evidence that people often rely on what they consider

fair. With their Ultimatum Game, they mentioned that people do not hesitate to punish if their

opponent asks for ‘too much’ (Güth e.a., 1982). This indicates that people do not act rational all the

time, but that there is something else people take into account when making economic decisions. In

negotiation games, the typical consideration of a person seems to be as follows: ‘if my opponent left

a fair amount to me, I will accept it. If not, and if I do not sacrifice too much, I will punish him by

choosing conflict’ (Güth e.a., 1982, p.384).

Akerlof & Yellen (1990) also found evidence that workers are likely to experience feelings of

relative deprivation when there are unequal wages. According to the fair wage-effort hypothesis,

workers proportionately withdraw effort as their actual wage falls short of their fair wage (Akerlof &

Yellen, 1990). They stated that if people do not get what they think they deserve, they get angry

(Akerlof & Yellen, 1990). As a consequence, workers whose wage is less than a fair wage will be

angry, and as a consequence of this anger will reduce their effort below the level they will offer if

fully satisfied (Akerlof & Yellen, 1990).

Hence, violating social norms about a fair division of value leads to negative fairness

perceptions, and negative fairness perceptions lead to less employee efforts, while, in contrast,

positive fairness perceptions lead to more effort (El Haji & Stoelhorst, 2010). If people receive a

material outcome they perceive as fair, they are inclined to exhibit positive reciprocity towards the

other party by putting forth more effort (Nelson, 2001; Rabin, 2004). Gift-giving is almost always

determined by norms of behaviour, it is about what the recipient expects, and he reciprocates in kind

(Akerlof, 1982). The norms of gift-giving are determined by the relationship between the parties;

thus, for example, it is expected that an increase in workers' productivity will be rewarded by

increased wages to the workers (Akerlof, 1982, p. 550). Much of union wage negotiations concerns

the question of what constitutes a fair wage. For example, if the average worker works harder than

expects a fair wage (Akerlof, 1982, p. 550), as a gift back from the firm. These suggestions result in

the following hypothesis:

• Hypothesis 2: The positive effect of an owner increasing the wage of the employee on effort, will be

mediated by the fairness perception.

I expect that the relationship between a wage increase and fairness perceptions will be moderated

by type of work.

As mentioned before, human resources are different from other resources. Especially

knowledge workers should be treated differently. Compared to more traditional workers, it is

possible that knowledge workers could feel more entitled to a reward. “Entitlements are rights, as

perceived by the individual. They are not abstract legal rights. Rather they denote the subjectively

perceived right that go along with a motivational disposition to defend them” (Schlicht, 1998 in

Gächter & Riedl, 2005, P. 249). These entitlements can be rooted in the extend of someone’s

intellectual and creative input (Oxoby & Spraggon, 2008), for that reason, the employee can claim

the residual value (Kim & Mahoney, 2010).

The Lockean theory argues that an individual deserves a property entitlement in resources

that have been accumulated or developed through the individual’s expenditure of effort (Hoffman &

Spitzer, 1985). The individual deserves the entitlement because he has ‘mixed his labour’ with the

resource (Hoffman & Spitzer, 1985). When a firm makes profit out of a product, the knowledge

worker who developed the product with his idea and knowledge, could feel he or she deserves the

extra value created by him/her. Knowledge workers can make a bigger difference in the

development and production of a product than traditional workers can do. Knowledge-based firms

are totally dependent on the commitment and ideas of their employees (Kim & Mauborgne, 2003).

According to Hamilton and Macy (1923 in Bloom, 1999), inter-organizational differences in pay must

reward excess ability, knowledge and skill, possessed by its recipient over the common labourer.

(Riegel, 1937, in Bloom, 1999). Especially knowledge is a resource which could deserve an higher

wage, due to the entitlements of the type of work. Gächter & Riedl (2005) refer to entitlements as

the subjective judgments of bargainers about what their fair share of the remaining pie is, in case the

claims are infeasible. As mentioned before, pay distributions are the array of compensation levels

paid for differences in work responsibilities, human capital, or individual performance within a

firm(Bloom, 1999). As mentioned before, firms generate rent when all stakeholders receive sufficient

compensation to hold them in place and some stakeholders get more than would be required to hold

them in place (Coff, 1999). With these entitlements, the employee could claim the residual value.

Kahneman e.a. (1986b) conclude in their research that a substantial majority of respondents

believes that employees are entitled to at least their current wage, even if labour market conditions

have changed in ways that reduce employees’ bargaining power. But respondents’ reaction changed,

when employees’ knowledge inputs into the development of the firms’ products was made explicit.

In these vignettes, respondents deemed a wage decrease unfair, irrespective of whether the firm

profitability was negative or positive. This suggests that there may be a substantial shift in fairness

perceptions with respect to value appropriation when products become knowledge-based (El Haji &

Stoelhorst, 2010). This indicates that a relationship between individual knowledge contributions and

the economic value of the firm’s products changes the perceived entitlement of employees to a

share of the value created by the firm (El Haji & Stoelhorst, 2010). However it is not necessarily clear

that the negative case of decreasing wages can be translated to the positive case of giving a reward.

But it gives an indication about the existence of differences between fairness perceptions of

knowledge workers and traditional workers.

Furthermore, there is evidence that entitlements influence the fairness perceptions of value

appropriation. Dictator Games show that a better intellectual performance than another person

gives a perceived right to a larger part of the whole, and as a result, gives the right to a larger reward

than the other person (Gächter & Riedl, 2002). So when the firm is making money out of a product

than another person who did not put in intellectual input but traditional labour, e.g. a line worker.

Because knowledge workers put more intellectual input in the product, it could be that knowledge

workers feel more entitled to the residual value than traditional workers do. These suggestions result

in the following hypothesis:

• Hypothesis 3: The positive effect of an owner increasing the wage of the employee on fairness

perceptions will be moderated by the type of work of the employee, in such a way that the positive

relationship on fairness perceptions will be strengthened for employees who do knowledge-intensive

work.

I expect that employees who do knowledge-intensive work and perceive a wage increase as fair, will

increase their effort more than employees who do traditional work.

As mentioned before, knowledge workers have property entitlements. These entitlements

should not be violated. When employees do not trust the owner of the firm to make good decisions,

their motivation is seriously compromised (Kim & Mauborgne, 2003). This is especially important for

knowledge-based firms, because they are totally dependent on the commitment and ideas of their

employees (Kim & Mauborgne, 2003). Therefore, companies should make sure that knowledge

workers feel that they are treated fair, so their motivation to put effort in their work will remain high.

Skilled work is more difficult to monitor than unskilled work (Akerlof & Yellen, 1990). For that

reason, the knowledge employee decides in large measure what he or she will contribute to the firm

and how great the yield from his or her knowledge will be (Drucker, 1992). Furthermore, as

mentioned before, El Haji & Stoelhorst (2010) stated that it is much easier for knowledge workers to

withhold their best effort than it will be for a traditional worker, without this being noticed by the

owner of the firm. This means that the relationship between fairness perceptions and the amount of

value that a firm is able to create is likely to be especially strong for knowledge driven firms (El Haji &

According to Alvesson (2000), there is probably a tendency for loyalty and work motivation to

go hand in hand. At a high level of loyalty, the employee gives priority to the needs of the firm

through seeing these as strongly overlapping with her own or even being altruistic and prepared to

make sacrifices for the good of the firm (Alvesson, 2000). When the level of loyalty is low, for

example when the employee does not feel treated fairly, he could leave the firm or put less effort in

his or her job. A crucial part of management in knowledge-intensive companies is thus to manage

loyalty in order to avoid less productive employees (Alvesson, 2000). These suggestions lead to the

following hypothesis:

• Hypothesis 4: The positive effect of fairness perceptions on willingness to create value for the firm,

will be moderated by type of work of the employee, in such a way that the positive relationship on

effort will be strengthened for a knowledge worker.

I expect that when an employee is a reciprocator and he or she perceives a wage increase as fair, he

or she will increase their effort more than employees who are self-regarding.

There are two personality types, according to researchers (Bridoux e.a., 2011; Bridoux &

Stoelhorst, 2014; Fehr & Gächter, 2000): self-regarding people and reciprocators. Self-regarding

individuals are inclined to maximize their own payoffs, so they care about the choices and payoffs to

others only insofar as they influence their own payoffs (Bridoux e.a., 2011). Reciprocators, on the

other hand, are more inclined than self-regarding individuals to enhance both joint payoffs and the

fairness of payoffs (Bridoux e.a., 2011). Therefore, I expect that people with these personality types

react differently on fairness perceptions regarding effort.

Self-regarding individuals only care about their personal payoffs and do not value fairness as

such, they are motivated to create value from a purely self-serving concern (Bridoux & Stoelhorst,

2014). More specifically, if they receive a wage increase, they receive a higher personal payoff. They

do not care if they feel the wage increase as fair or unfair for them. The fairness of the value

people will only put more effort in their work, when they increase their personal payoff with that

raise in effort. But when they received it, it does not matter if it is fair or unfair, they reached a

higher personal payoff. Therefore, I expect that self-regarding people do not change their level of

effort when they perceive the wage increase as fair.

In contrast, reciprocators are inclined to reward a fair, and punish an unfair, treatment of

themselves or others, even if rewarding or punishing is personally costly (Bridoux & Stoelhorst, 2014;

Fehr & Gächter, 2000). So when reciprocators perceive the wage increase as fair, they want to

reward the firm for that treatment and may will increase their effort. By increasing their effort, the

firm could make more money, which will be the reward of the employee to the firm. This extra effort

is the acknowledgement for the fairness of the wage increase. So, due to reciprocity, a firm can

create value by sharing it with stakeholders (Bosse e.a., 2009).

As mentioned before, employees who work for a firm tend to develop a sentiment for that

firm; to a great extent they anthropomorphize these firms (Akerlof, 1982). In return for treating them

fair, better workers are often willing to work harder, especially the reciprocators, because they

reward the firm in return by putting more effort in their job. This suggestions result in the following

hypothesis:

• Hypothesis 5: The positive effect of fairness perceptions on willingness to create value for the firm will

be moderated by personality type, in such a way that the positive relationship on effort will be

4.

Research design

This chapter will discuss the method and design that is used to test the research question.

Furthermore, it will describe the data collection and operationalization of the study.

4.1 Method

This study will be a vignette study, and consists of two components: a vignette experiment as the

core element, and a traditional survey for the supplementary measurement of additional

respondent-specific characteristics, which are used as covariates in the analysis of vignette data

(Atzmüller & Steiner 2010).

Vignettes are an experimental method. They are hypothetical stories about individuals and

situations which make reference to important points in the study of perceptions, beliefs, and

attitudes (Hughes, 1998). Hughes (1998) mentions that vignettes highlight selected parts of the real

world that can help unpack individuals’ perceptions of a wide range of social issues. This study is

about fairness perceptions, therefore vignettes are a good technique to answer the research

question. Participants are asked to respond to the stories with what they would do in a particular

situation or how they think a third person will respond (Hughes, 1998). Individuals have a limited

capacity to maintain a discursive awareness of every aspect of day-to-day life and people are

selective in what they interpret (Hughes, 1998). A vignette too is selective, producing a ‘snapshot’ of

a given situation, which offers participants distance and space to provide a discursive interpretation

within the context of a vignette (Hughes, 1998). This makes it a good method to see how people

would react in a particular situation and in a given context. A criticism of the vignette technique is

that it neglects interaction and feedback, individuals are constantly responding to the people and

environment around them, which is a necessary part of social life (Hughes, 1998). But, according to

Hughes (1998), there is no research tool that can truly reflect peoples’ real life experience. If

vignettes are an attempt to match real life experiences then they have clear limitations, but if they

people with a situated context in which to respond then they can make a useful contribution to

research methodology (Hughes, 1998).

The combination of a vignette experiment and a survey is a good research method, according

to Atzmüller & Steiner (2010). They write about how vignette studies overcome the limitations of the

traditional survey and the classical experiment. Traditional surveys show a high external validity, due

to their representativeness and their multivariate and multivalent measurements. However, this goes

along with a low internal validity caused by the multicollinearity of measured variables and the

passive way of taking measurements. On the other hand, classical experimental designs derive their

high internal validity from orthogonal design plans and an active mode of measurement enabled by

the controlled intervention, but these have the drawback of low external validity due to their

non-representativeness and oversimplified setting (Atzmüller & Steiner, 2010). Vignette studies try to

overcome these limitations by combining these two methods (Atzmüller & Steiner, 2010).

4.2 Vignette design

The vignette study has four different treatments, see table 1.

In the rows you will find the owners’ choices about whether to increase the wage of the

employee, which is the independent variable. In the column you will find the different types of work,

which is the first moderator. They are classified as knowledge-intensive or traditional work. There are

four different vignettes (matched to the four treatments). The independent variable and the first

moderator will be manipulated in the vignettes. Each respondent receives only one version of the

Type of work Owners’ choice whether to increase wage Knowledge-intensive work Traditional work Wage increase IK IT Same wage SK ST

vignette, to avoid easy detection of the setup of the study. The vignettes are based on the ninth

question of Kahneman e.a. (1986b). The vignettes are:

1) IK: Imagine that you are working for a small company that employs several workers and pays them average wages. Your job is to develop and design the company’s products and you perform your job

well. The company recently launched a new product and this year’s profit is higher than the profit of

last year. The owners decide to increase your wage by 5 percent.

2) SK: … Your job is to develop and design the company’s products. … The owners decide to give you the same wage as last year.

3) IT: … Your job is to pack products at an assembly line. … The owners decide to increase your wage by 5 percent.

4) ST: … Your job is to pack products at an assembly line. ... The owners decide to give you the same wage as last year.

Manipulation checks

Manipulation checks are necessary to test if the respondents understood the vignettes and if the

manipulated parts of the vignettes were clear. The manipulation checks were on the page after the

vignettes, so that respondents could not read the vignettes again when they had to fill in the

manipulation checks. There are four manipulation checks. The first one is to check if the respondent

understood what kind of work was mentioned in the vignette: work with high intellectual input

(knowledge work) or low intellectual input (traditional work). The scale for this question is a 5-point

Likert scale (from ‘very low intellectual input’ to ‘very high intellectual input’). The second

manipulation check is to verify if the respondent understood the decision of the owner. The possible

answers were: ‘your wage goes up’, ‘your wage stays the same’, or ‘I don’t know’. The third check is

about how easy or hard it was to imagine themselves in that situation. If it was very hard for

respondents, this could indicate that the outcome of the vignettes is not reliable. For this question a

5-point Likert scale was used: from ‘very easy’ to ‘very hard’. The last manipulation check was about

can differ from reality. This question also had a 5-point Likert scale, from ‘very realistic’ to ‘very

unrealistic’.

4.3 Data collection

To be able to draw some conclusions, there should be 40 to 50 respondents per treatment;

therefore, there should be 160 to 200 respondents in this study. As mentioned before, each

respondent is presented with only one version of the vignette, to avoid easy detection of the setup

of the study.

The questionnaire is executed using Qualtrics. It has been made in this program and the link

of the questionnaire is send to respondents. The respondents were approached by e-mail, LinkedIn

and Facebook. The e-mail is sent to relatives, friends, (old) classmates etc., which is convenience

sampling. Some of them forwarded the e-mail to their colleagues, relatives and friends, which is

snowball sampling. Furthermore, on several Facebook pages and LinkedIn I posted a message if

people would like to fill in my questionnaire, so the type of sampling here is self-selection sampling.

4.4 Operationalization

In this section the operationalization of the dependent variable, mediator, moderator and control

variables is clarified. The questionnaire is attached in appendix 1.

Dependent variable

There are six questions to measure the dependent variable, effort. The effort scale is divided into two

parts: positive behaviour (question 1 to 3) and negative behaviour (question 4 to 6). The questions

have a 5-point Likert scale: very unlikely; unlikely; neither unlikely nor likely; likely; very likely. See

Question Based on Source

Positive behaviour

1 I would make sure to perform

the tasks that are expected of me

Performs tasks that are expected of him/her

Williams & Anderson (1991)

2 I would try to work as hard as

possible

I would try to work as hard as possible

Brockner, Grover, Reed, & Dewitt (1992)

3 I would try to complete the

tasks assigned to me as well as possible

Adequately completes assigned duties

Williams & Anderson (1991)

Negative behaviour

4 I would purposely work slowly

when things need to get done

Purposely worked slowly when things needed to get done

Spector e.a. (2006)

5 I would purposely do my work

incorrectly

Purposely did your work incorrectly

Spector e.a. (2006)

6 I would take undeserved work

breaks

Takes undeserved work breaks

Williams & Anderson (1991)

Table 2: Effort scale questions

Mediator

There is one question asked to measure fairness perceptions: ‘What do you think about the decision

of the owners about your wage?’ This question has a 5-point Likert scale: completely unfair; unfair;

neither fair nor unfair; fair; completely fair.

Moderators

The first moderator, type of work, is manipulated in the vignettes, as mentioned before. The second

moderator, personality types, is measured using the SVO-slider from Murphy, Ackermann, &

Handgraaf (2011). Only the first six questions of their slider are used. There is also a second part of

the SVO Slider. This set of items is explicitly designed to disentangle the prosocial motivations of joint

maximization from inequality aversion. The items are defined in the prosocial area of the self/other

allocation plane and have approximately the same magnitude as the six primary items (Murphy e.a.,

2011, p.773). This study will only focus on the difference between prosocial and self-interested

people, therefore the difference between the two prosocial groups is not relevant, therefore only the

first six items are used.

Given the angles that result from idealized SVO types, proper boundaries between categories

four groups are: altruists have an angle greater than 57.15°; prosocials have angles between 22.45°

and 57.15°; individualists have angles between –12.04° and 22.45°; and competitive types have an

angle less than –12.04° (Murphy e.a., 2011, p. 773). Therefore, the higher the SVO score of a

respondent, the more prosocial the respondent is.

Control variables

At the end of the questionnaire, there are eight control variables. First it is important to know the

age of the respondents. According to Van Lange, Otten, De Bruin, & Joireman (1997) prevalence of

prosocials increased, and the prevalence of individualists and competitors decreased, from early

adulthood to middle adulthood and old age. The second control question is about gender. It is

possible that men and women have different fairness perceptions. Previous studies, like Van Lange

e.a. (1997) found that the percentage of prosocials was higher among women than among men,

whereas the percentage of individualists was lower among women than among men. The third

question is about the nationality of the respondent. In other continents people have different

cultural backgrounds and, therefore, could have different fairness perceptions. The fourth question is

about the highest level of education the respondents have completed. They could choose between:

Primary school; Secondary school; Vocational education (MBO); College (HBO); University; or other.

This question was added, because it is possible that people will react differently to the type of work,

due to the ability or not to imagine themselves in that situation based on their educational

background. The fifth question is about the employment status. If people are students or

unemployed, it might be harder to imagine themselves in a job. Respondent could choose between:

employed; self-employed; unemployed; and student. The sixth control question is about the study

area. People could choose: economics and business; law; or other. It is possible that students of

Economics and Business score different on the SVO-slider, because they are already familiar with

public good dilemmas. Previous research indicated that Law students could also have fairness

perceptions like Economics and Business students (Stofberg, thesis-2009). The seventh question is

indicate how well they can imagine themselves in a job. The last control question is about the level of

education that is required for the job in which you have the longest work experience. The possible

answers are: I do not have any work experience; primary school; secondary school; vocational

(MBO); college (HBO); and university. Most high-educated jobs are more knowledge-based than

low-educated jobs. This is important to know as it can influence the identification of the type of work in

5.

Results

This chapter shows the results of the analyses in this study.

5.1 Manipulation checks

As mentioned before, the first two manipulation checks were performed in order to verify if the

manipulation of the independent variable and the first moderator was understood by the

respondents. The respondents whose answers did not match with the vignette were deleted, so 36

respondents were deleted. 5 of them received vignette one; 16 vignette two; 5 vignette three; and

10 vignette four. This means that 10 respondents with a vignette about a wage increase, and 26

respondents with the same wage are deleted; and 21 respondents with the vignette about

knowledge work, and 15 with traditional work are deleted.

The other manipulation checks have a mean of 2.36 (σ = .789) for imagination and 2.32 (σ =

.800) for realistic on a 5-poin Likert scale (very easy … very hard; very realistic … very unrealistic). This

means that respondents could imagine themselves in the situation and thought the situation was

realistic.

5.2 Descriptive statistics

The data is collected in 15 days using the questionnaire in Qualtrix. 323 people started the

questionnaire and 232 completed it. There were no missing data, because people could not go

through with the questionnaire unless they answered each question. As mentioned before, 36

respondents are deleted due to the manipulation checks. As a result, the sample size is 196

respondents. In table 3 you will find the descriptions of the sample. 118 (60.2%) of the respondents

are female and 78 (39.8%) are male. Their age is between 17 and 72 years old with an average of

29.21 years. Most of the respondents are Dutch, 90.3% (N = 177). Most respondents have completed

higher education, namely 169 (86.2%). 83 (42.3%) of the respondents are employed and almost the

same amount are students: 86 (43.9%). 42.3% of the respondents have Economics & Business as

zero and 45 years, with an average of 7.54 years. Most of the respondents have a job where there is

the need for higher level education, namely 65.3%.

Variable Level N % Cummulative %

Gender Male 78 39.8 39.8

Female 118 60.2 100

Nationality Dutch 177 90.3 90.3

Non-Dutch 19 9.7 100

Level of education

Lower education (primary,

secondary and vocational/MBO) 27 13.8 13.8

Higher education (college/HBO,

University and other/post HBO) 169 86.2 100

Employment status Employed 83 42.3 42.3 Self-employed 19 9.7 52 Unemployed 8 4.1 56.1 Student 86 43.9 100

Study area Other 113 57.7 57.7

Economics and Business 83 42.3 100

Level of education needed for job

I don’t have work experience 14 7.1 7.1

Lower education (primary,

secondary and vocational/MBO) 54 27.6 34.7

Higher education (college/HBO,

University) 128 65.3 100

Variable Min – Max M SD Age 17 – 72 years 29.21 10.95

Working

experience 0 – 45 years 7.54 9.85

Table 3: Sample descriptive (N = 196)

Four control variables in table 3 are categorized:

- Nationality - Level of education - Study area

There are not a lot of different nationalities, 90.3% is Dutch, and the other 9.7% is too small

to divide them into groups and draw some conclusions from. Therefore, differences in other

nationalities than Dutch is not useful for the analysis. That is why there are two categories made for

this control variable: 0 = Dutch, 1 = non-Dutch. There is a distinction made between highly educated

people and low educated people, instead of all the different levels of education. Lower education is

primary school, secondary school and vocational education, this received the value ‘0’. Higher

education is college, university and one other (which is ‘post HBO’). The higher education received

the value ‘1’. In the questionnaire there is a distinction made between Economics and Business, Law

and other. The means of the three different groups were compared and it showed that the average

score of Law students was almost the same as of the ‘other’ category, so they are combined. As a

result, only two categories are used in the analysis: ‘Economic and Business’ and ‘other’. For that

reason, Economics and Business = 1, and other = 0. Level of education needed for the job is

combined into three levels: I don’t have a job, lower education and higher education. The lower and

higher education is combined in one dummy variable, where ‘0’ is lower education and ‘1’ is higher

education, and for ‘I do not have any work experience’ a second dummy variable is added, where ‘0’

is I have work experience and ‘1’ is I do not have work experience. See table 5 for the overview of the

recoded variables.

There are also descriptions for the independent, dependent, mediator and moderator

variables. These are shown in table 4. 45.9% of the respondents (N = 90) received a vignette where

the wage stays the same, and the other 54.1% of the respondents a vignette where the wage will go

up. 109 respondents (55.6%) received a vignette where they had to imagine they are traditional

workers, the rest of them (N = 87 is 44.4%) received a vignette where they were knowledge workers.

To measure fairness perception a 5-point Likert scale is used. As shown in table 4 the range of the

answers is between 1 and 5, so the whole Likert scale is used by the sample. The average of fairness

perceptions is 3.43 (SD = 0.92). The range of the SVO slider is -16.26 to 51.30, with an average of

scale in total is between 2.83 and 5, with an average of 4.34 (SD = 0.52). The range of positive and

negative behaviour is between 2 and 5 with an average of 4.25 (SD = 0.59) for positive and an

average of 4.43 (SD = 0.57) for negative behaviour. Effort negative behaviour is reversed coded.

Variable N % Cummulative % Wage (independent) Same 90 45.9 45.9 Goes up 106 54.1 100 Work (moderator 1) Traditional 109 55.6 55.6 Knowledge 87 44.4 100 Variable Min-Max M SD Fairness (mediator) 1 - 5 3.43 0.92 SVO (moderator 2) -16.26 – 51.30 26.93 12.81

Effort (dependent) Total 2.83 - 5 4.34 0.52

Positive behaviour 2 - 5 4.25 0.59

Negative behaviour (reversed coded)

2.67 - 5 4.43 0.57

Table 4: Independent, mediator, moderators and dependent descriptive (N = 196) 5.3 Recoded variables

Some variables had to be recoded or computed in new variables, to use them in the analyses. For the

effort scale, the questions of the second dimension, negative behaviour, are reversed coded. The six

questions about effort are computed into three new variables (effort total, effort positive, effort

negative). The new variables represent the mean of the different questions used for the effort scale.

The independent variable ‘wage’ and the first moderator ‘work’ are manipulated in the

vignette. To use this variables in the analysis, they need to be coded (see table 5). For two control

variables there also need to be dummy variables (see table 5): employment status and education

0 1 Wage Stays the same Goes up

Type of work Traditional Knowledge

Employment status Employed Other Employed

Self-employed Other Self-employed

Unemployed Other Unemployed

Student Other Student

Education needed for the job

No working experience Other No working

experience

Low - High Lower level Higher level

Table 5: Recoded variables 5.4 Reliability analysis

Now the variables are all useful for the analysis, the reliabilities can be checked. Reliability is the

extent to which data collection techniques or analysis procedures yield consistent findings (Saunders

e.a., 2009). This analysis is done to check if the scale is reliable when you put a number of items

together. When the value of crohnbach’s alpha is higher than 0.7, the items have a good internal

consistence and the scale is reliable (Field, 2013). There are three scales for which reliability is

checked:

1) Effort scale, positive behaviour (first three questions of the effort scale) 2) Effort scale, negative behaviour (second three questions of the effort scale) 3) Effort scale in total (all six questions)

The crohnbach’s alpha for positive behaviour is .780. The crohnbach’s alpha for negative

behaviour is .697, and for effort in total is .822. Effort total and effort negative are very reliable, as

these crohnbach’s alphas are > .70. The alpha of effort negative is very close to .70, if there were

items deleted, the crohnbach’s alpha will drop. Therefore, I decided not to delete any item.

Furthermore, the two parts of the effort scale are not used in the regression analyses, only effort