Trust or Reciprocity: The Effect of Controls on Other-Regarding Behavior

Transcription

1 Trust or Reciprocity: The Effect of Controls on Other-Regarding Behavior Jace Garrett Clemson University Jeff Livingston Bentley University Bill Tayler Brigham Young University

2 Motivation Prior research generally finds a negative effect of controls on trust Coletti et al. (2005) find that controls can actually have a positive effect on trust and subsequent cooperation Coletti et al. s experimental design allows for the development of reciprocity, which could explain later cooperation (Tayler and Bloomfield 2011)

3 Motivation Relationships in the workplace have differing levels of interaction and opportunity to develop reciprocity In interactive relationships, individuals work together and may benefit from each other s behavior In non-interactive relationships, behavior may still be observed, but individuals are less likely to benefit from each other s behavior To the extent the effect of controls is driven by reciprocity, it may not persist in relationships with little direct interaction

4 Research Question To what extent can a positive effect of controls on other-regarding behavior be explained by reciprocity, rather than trust? Do controls foster other-regarding behavior in non-interactive settings?

5 Control Any action a firm takes to influence the behavior of its employees and align their behavior with the interests of the firm (Jensen and Meckling 1976) Examples: performance evaluations, monitoring, bonuses, penalties

6 Trust Belief perception of trustworthiness Action taking a risk based on positive expectations of the other person s behavior

7 Other-regarding Behavior Behavior that can be construed to be motivated by concern for others interests rather than self-interest

8 How Controls Foster Trust Fundamental Attribution Error Individuals over-attribute behavior to disposition Coletti et al. (2005) argue that Controls improve behavior Individuals assume it is because other person is more trustworthy Trust is greater under control

9 Alternative Explanations? Other-regarding behavior (e.g., cooperation) can be driven by (at least) two motives Trust cooperating because you expect to get something back Reciprocity cooperating to reward someone s past good behavior We disentangle by manipulating the level of reciprocity motives (i.e., the benefit received from others cooperation)

10 Theoretical Model Control Observed Cooperation Trust Reciprocity Other- Regarding Behavior

11 Hypotheses H1a: Other-regarding behavior and trusting belief are greater when a control is present than when a control is not present. H1b: The effect of control presence on other-regarding behavior and trusting belief is mediated by observed cooperation.

12 Hypotheses H2: Individuals who benefit directly from cooperation engage in otherregarding behavior more than those who do not benefit directly from cooperation. H3: The positive effect of controls on other-regarding behavior is greater for individuals who benefit directly from cooperation than for those who do not benefit directly from cooperation.

13 Hypotheses Other-Regarding Behavior Trust (H1) Reciprocity (H2) Reciprocity (H2) Trust (H1) Manager Observer No Control Control

14 Experimental Design 2 x 2 design manipulating level of reciprocity (manager vs. observer) and control presence (control vs. no control) Stage 1 Manager participants play Prisoner s Dilemma style game (7 rounds). Two observers matched with each pair of managers Control condition adds 80% chance of bonus for cooperation After managers make decisions, observers are shown the decisions, but receive no payoff Observers and managers both have same information on which to build trust, but differ in their motivation to reciprocate Observer 1 Observe Manager A Cooperate Manager B Observe Observer 2

15 Experimental Design Stage 2 Trust Game Managers play a separate game with their partner manager, and observers play with one of the managers they observed First mover receives 100 points to invest Second mover receives 3x points sent Second mover chooses how many points to return to first mover Observer 1 Send Send/Return Send Manager Manager A B Return Send/Return Return Observer 2

16 Descriptive Statistics Observed Cooperation No Control Control Difference t- stat (2.09) (1.6) (p < 0.01) n = 34 n = 38 Investment Trusting Belief No Control Control Total No Control Control Total Manager (39.5) (37.0) (40.0) (71.6) (81.6) (78.7) Observer (36.2) (37.5) (37.6) (64.4) (71.2) (67.8) Total (37.8) (37.8) (67.8) (76.5) n = 68 n = 76 n = 68 n = 76

17 Results (H1a) TABLE 2, Panel A Mean (St. Dev) No Control Control Difference t-stat Investment (37.79) (37.79) p = 0.01 Trusting Belief (67.85) (76.46) p = 0.03 n = 68 n = 76 H1a: Other-regarding behavior and trusting belief are greater when a control is present than when a control is not present.

18 t = 5.61 p < 0.01 Results (H1b) Mediation Analysis Observed cooperation F = 8.53 p < 0.01 Control presence t = 2.41 p = 0.01 Controlling for F = 0.32 observed cooperation p = NS Other-regarding behavior

19 t = 5.61 p < 0.01 Results (H1b) Mediation Analysis Observed cooperation F = 4.78 p = 0.02 Control presence t = 1.99 p = 0.03 Controlling for F = 0.47 observed cooperation p = NS Trusting Belief

20 Results (H2) TABLE 2, Panel A Mean (St. Dev) Observer Manager Difference t-stat Investment (37.62) (39.96) p = 0.04 Trusting Belief (67.76) (78.74) p = 0.43 n = 68 n = 76 H2: Individuals who benefit directly from cooperation engage in other-regarding behavior more than those who do not benefit directly from cooperation.

21 Results (H3) Panel C Planned Contrast Source Partial SS df F Prob > F Overall test < 0.01 Residual We use contrast weights of -3, -2, 1, and 4 for the observer/no control, manager/no control, observer/control, and manager/control conditions, respectively. H3: The positive effect of controls on the otherregarding behavior is greater for individuals who benefit directly from cooperation than for those who do not benefit directly from cooperation.

22 Conclusions Certain types of controls can lead to both greater trust and greater reciprocity Controls can increase trust even among parties who do not directly interact, as long as sufficient feedback is provided Controls foster the development of trust in others goodwill, rather than simply trust in the task being controlled

23 Implications Research examining the control-trust relationship should consider the effect of reciprocity, especially in interactive relationships Firms can enjoy benefits from controls beyond the initial increase in employees good behavior (or decrease in bad behavior) Firms may benefit from increasing the level of interaction among their employees

24 Thank you!