An experimental study of the interaction effects of incentive compensation, career ambition, and task attention on Chinese managers' strategic risk behaviors

Abstract

Summary Building on the person–pay interaction model, we developed and tested a model for the influence of managers' career ambition and task attention on their responses to incentive compensation under different conditions of firm performance. We argued that managers with greater career ambition and task attention will be more responsive to incentive compensation, thereby engaging in more strategic risk behaviors, such as strategic risk taking and strategic change. Results of our experiment using a managerial decision‐making game with a sample of Chinese managers partially supported this contingency perspective. Under the condition of performance decline, managers' career ambition only accentuated the positive relationship between incentive compensation and strategic change. By contrast, task attention strengthened the positive relationships between incentive compensation and both strategic risk taking and strategic change. However, under the condition of performance growth, neither managers' career ambition nor their task attention influenced their responses to incentive compensation. We discuss the implications for how organizational leaders can use incentive compensation to influence the strategic risk behaviors of managers. Copyright © 2015 John Wiley & Sons, Ltd.

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