pdf - Nyenrode Business Universiteit
pdf - Nyenrode Business Universiteit
pdf - Nyenrode Business Universiteit
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
5.1. SUMMARY, CONCLUSIONS AND DISCUSSION 121<br />
In chapter 3, I further analyse the noise-reduction effect of RPE by examining the<br />
consequences of using RPE. Whereas chapter 2 explains RPE use with assumed<br />
noise-reducing effects of RPE, chapter 3 analyzes this explanation in a more direct<br />
manner. Chapter 3 studies whether organizations that use RPE experience reduced<br />
levels of noise in the performance evaluation. This question is important because the<br />
results from chapter 2 may be driven by alternative explanations. The literature provides<br />
various rival explanations for the association between uncertainty and RPE use.<br />
These alternative explanations include the increased need for internal competition<br />
(i.e., by pitting employees against each other through evaluating their performance<br />
relative to each other) and the desire to stimulate organizational learning via the<br />
benchmarking of performance. The results of chapter 3 reaffirm the findings of chapter<br />
2 concerning noise reduction. The analyses show that RPE use yields reduced<br />
levels of noise in the performance evaluation. This finding strengthens the conclusion<br />
that RPE effectively reduces noise in the performance evaluation of business<br />
unit managers.<br />
3. RPE use and the reduction of room for managerial opportunism<br />
The third research topic concerns the opportunism-mitigation perspective on RPE,<br />
which is based on Murphy (2001). According to this perspective, RPE can reduce<br />
the room that managers have to opportunistically influence their performance target<br />
difficulty, by placing the target determination process outside their sphere of influence<br />
(see: Murphy 2001). This perspective is addressed in chapters 2 and 4.<br />
As discussed in the previous section, chapter 2 explains RPE use with factors that<br />
antecede RPE use. In addition to the measure of common uncertainty that drives<br />
noise, chapter 2 includes an antecedent that is based on the opportunism-mitigation<br />
perspective. This antecedent is information asymmetry, which is combined with business<br />
unit comparability. Information asymmetry increases the room for the manager<br />
to behave opportunistically. I argue that the opportunism-increasing effect of information<br />
asymmetry can only be solved by RPE if the business unit is sufficiently<br />
comparable to a peer group 1 . However, the analyses do not show robust support<br />
for the opportunism-mitigating effect of RPE. Only one of two models supports the<br />
joint effects of information asymmetry and business unit comparability. However,<br />
this support is only marginally significant.<br />
The opportunism-mitigation explanation receives additional empirical attention in<br />
chapter 4. Similar to the approach of chapter 3, the fourth chapter of my thesis<br />
1 If a business unit is not comparable to a relevant peer group because the unit produces highly specific<br />
products or services or relies heavily on specific processes, the unit’s performance cannot be assessed by the<br />
performance of its peers. In this case, peer comparison is not informative about the performance target.