Non-pecuniary Motivations Research Articles

Lifestyle entrepreneurs in winemaking

PurposeThe purpose of this study is to investigate non-pecuniary motivations and benefits of involvement in the wine business. Combining these motives with winery owners’ characteristics, attitudes and implemented strategies, the aim is to identify different winery owners’ styles in small-medium family-run firms.Design/methodology/approachThe applied method is a qualitative explorative study involving in-depth interviews with Tuscan winery owners. They have hands-on involvement in the winemaking process, own a family business and supervise all of the production phases, from grape growing to bottling.FindingsThe study highlights the key role of non-economic motivations for winery owners. Passion, independence and a desire to live close to nature are predominant compared to pecuniary motivations, such as profit maximization. Therefore, the “lifestyle-oriented” style, characterized especially by the achievement of non-pecuniary benefits, represents the prevailing style amongst the interviewed winery owners, in contrast to the “business-oriented” style, which features typical producers described by mainstream economic theory.Originality/valueThe findings of this study are pivotal because they can facilitate a better understanding of how family-run wineries make decisions related to, e.g. firm size, staff management, product quality, exports and sustainability.

Entrepreneur—A Jockey or a Horse Owner?

The business literature has long been concerned with understanding why people become entrepreneurs. This literature, however, has mixed together two important issues — founding a new business and being the right person to operate it. Up until recently, entrepreneurship scholars have largely believed that founders run their ventures personally. Yet it is not clear from either a theoretical or an empirical standpoint why this should be the case. Indeed, entrepreneurs are often criticized for having limited business expertise and placing personal motives ahead of financial returns. Whether founders are optimal managers for their firms strongly depends on their motives for operating the firm personally, i.e., whether their decision is driven by expected non-pecuniary benefits of management or by more strategic considerations. In our paper, we use fine-grained data on entrepreneurs in Denmark to examine what motivates them to operate their firms personally as opposed to hiring a manager. We find that while nonpecuniary motives play a role in the founders’ decision to operate their firms personally, opportunity cost of owner-management and relevant prior experience are equally important. Thus, entrepreneurs put significant emphasis on the characteristics that would improve firm performance and their overall wealth. Our findings are similar for entrepreneurs in high-technology and low-technology sectors as well as for founders who hire non-family and family managers. We also observe that when founders do not manage their firms personally, they typically work full-time at another firm or play a non-managing role in their own venture. In our subsequent analysis, we investigate how these two types of non-managing founders differ, providing further insights into their behavioral motives.

No Longer Riding Dirty: The Effect of Electric Vehicle Subsidies on Automobile Markets

Global efforts to stymie greenhouse gas emissions have been diverse and multifaceted; with limiting carbon emissions from internal combustion automobiles being implicated as a key tactic. In this work, we examine one approach taken by governments to steer consumers away from traditional vehicles and accelerate the diffusion of green technologies: subsidizing the purchase of electric automobiles. While many subsidies have accelerated the diffusion of EVs, the source of the change in purchase behavior remains unknown. On the one hand, as policymakers hope, such subsidies might be cannibalizing established fossil-fuel vehicle markets, i.e. cannibalization. On the other hand, new markets might be emerging as a result of purchases made by customers who otherwise would not have purchased a vehicle, i.e. market expansion. Leveraging the phased rollout of an electric vehicle subsidy in China, we find that subsidies strongly encourage EV purchase, but yield no notable effect on traditional vehicle purchasing. This suggests a market expansion effect and undermines the efficacy of subsidies in slowing traditional vehicle sales; indicating that while subsidies can accelerate the diffusion and adoption of de novo technologies, the abandonment of outmoded technologies is not guaranteed. Further, we find these effects are moderated by non-pecuniary motivations, viz. air pollution. Theoretical and practical implications are discussed within.

Pecuniary and Non-Pecuniary Motivations for Tax Compliance: Evidence from Pakistan

We examine two Pakistani programs to explore the role of deterrence as well as social and psychological factors in the tax compliance behavior of agents. In the first of these programs, the government began revealing income tax paid by every taxpayer in the country. The second program publicly recognizes and rewards the top 100 tax paying corporations, partnerships, self-employed individuals, and wage-earners. We find that both public disclosure and social recognition of top taxpayers caused a substantial increase in tax payments. We explore the drivers of this behavior, including the shift of social norms toward compliance.

Do Minorities Misrepresent Their Ethnicity to Avoid Discrimination?

Discrimination against minorities is pervasive in many societies, but little is known about strategies minorities may apply to minimize discrimination. In our trust game with 758 highschool students in the country of Georgia, ethnic Georgian trustors discriminate against the ethnic Armenian minority group. We introduce an initial signaling stage to investigate Armenians’ willingness to hide their ethnicity to avoid expected discrimination. 43 percent of Armenian trustees untruthfully signal that they have a Georgian name. Signaling behavior is driven by expected transfers and non-pecuniary motives. This strategic misrepresentation of ethnicity increases Georgian trustors’ expected back transfers and eliminates their discriminatory behavior.

Do Minorities Misrepresent Their Ethnicity to Avoid Discrimination?

Discrimination against minorities is pervasive in many societies, but little is known about strategies minorities may apply to minimize discrimination. In our trust game with 758 highschool students in the country of Georgia, ethnic Georgian trustors discriminate against the ethnic Armenian minority group. We introduce an initial signaling stage to investigate Armenians’ willingness to hide their ethnicity to avoid expected discrimination. 43 percent of Armenian trustees untruthfully signal that they have a Georgian name. Signaling behavior is driven by expected transfers and non-pecuniary motives. This strategic misrepresentation of ethnicity increases Georgian trustors’ expected back transfers and eliminates their discriminatory behavior.

Pecuniary and Non-Pecuniary Motivations for Tax Compliance: Evidence from Pakistan

We examine two Pakistani programs to explore the role of deterrence as well as social and psychological factors in the tax compliance behavior of agents. In the first of these programs, the government began revealing income tax paid by every taxpayer in the country. The second program publicly recognizes and rewards the top 100 tax paying corporations, partnerships, self-employed individuals, and wage-earners. We find that both public disclosure and social recognition of top taxpayers caused a substantial increase in tax payments. We explore the drivers of this behavior, including the shift of social norms toward compliance.

The effect of pro-environmental preferences on bond prices: Evidence from green bonds

Abstract We use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. We perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. We show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors’ pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market.

Why is there resistance to works councils in Germany? An economic perspective

Recent empirical research generally finds evidence of positive economic effects for works councils, for example with regard to productivity and – with some limitations – to profits. This makes it necessary to explain why employers’ associations have reservations about works councils. On the basis of an in-depth literature analysis, this article shows that beyond the generally positive findings, there are important heterogeneities in the impact of works councils. The authors argue that those groups of employers that tend to benefit little from employee participation in terms of productivity and profits may well be important enough to shape the agenda of their employers’ organization and have even gained in importance within their organizations in recent years. The authors also discuss the role of deviations from profit-maximizing behavior like risk aversion, short-term profit-maximization and other non-pecuniary motives, as possible reasons for employer resistance.

Spillovers from Conservation Programs

Conservation programs have increased significantly, as has the evaluation of their impacts. However, the evaluation of their potential impacts beyond program borders has been scarce. Such spillovers can significantly reduce or increase net impacts. In this review, we discuss how conservation programs might affect outcomes beyond their borders and present some evidence of when they have or have not. We focus on five major channels by which spillovers can arise: (1) input reallocation; (2) market prices; (3) learning; (4) nonpecuniary motivations; and (5) ecological-physical links. We highlight evidence for each channel and emphasize that estimates often may reflect multiple channels. Future research could test for spillovers within different contexts and could separate the effects of different channels.

Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

Examining a shock to the salience of the sustainability of the US mutual fund market, we present causal evidence that investors marketwide value sustainability. Being categorized as low sustainability resulted in net outflows of more than $12 billion while being categorized as high sustainability led to net inflows of more than $24 billion. Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high sustainability funds outperform low sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and non-pecuniary motives influencing investment decisions.

Amateurs: Low-Cost Development, Market Participation & Innovation on Digital Platforms

Digital platform-based marketplaces often have a wide variety of amateurs working alongside professional enterprises and entrepreneurs. Can a platform owner alter the number and mix of market participants? I develop a theoretical framework to show that amateurs emerge as a distinct type of market participant, subject to different market selection conditions, and differing from professionals in quality, willingness to persist on the platform, and in mix of motivations. I clarify how targeted combinations of tweaks to platform design can lead the “bottom to fall out” of a market to large numbers of amateurs. In data on mobile app developers, I find that shifts in minimum development costs and non-pecuniary motivations are associated with discontinuous changes in numbers and types of developers, precisely as predicted by theory. The resulting flood of low-quality amateurs is in this context is associated with equally significant increases in numbers of high-quality products.

Jewels in the Crown: Exploring the Motivations and Team Building Processes of Employee Entrepreneurs

This study uses inductive methodology to examine the motivations and team building processes of employee entrepreneurs through the analysis of thirty founding narratives of disk drive industry spinouts founded between 1977-1997. Our grounded theory building approach uncovers the underappreciated role of non-pecuniary motivations and human capital corridors in the team assembly process. We find ringleaders — the founders who spearhead spinout creation — are often driven by a non-pecuniary desire to create given a fertile industry environment, particularly when they encounter bureaucracy, interpersonal/ethical frictions, or strategic disagreements within the parent firm. They seek out, through human capital corridors, the best cofounders possessing complementary knowledge, skills, and problem-solving abilities but similar values, and work ethic. Cofounders, particularly those without prior startup experience, were eager to ensure they left on good terms with their parent firms, to retain the option of return to paid employment as a safeguard against risks inherent in entrepreneurship. These motivations and team building processes shape the spinout firm’s strategic considerations: the founding team seeks to create unique value propositions, with a reluctance to steal technologies from their parent firms, but a willingness to poach talent. Triangulation with quantitative data reveals that spinouts created with human capital corridors team building processes had significantly better capabilities and success than spinouts with that lacked some aspects.

Information Sharing, Advice Provision, or Delegation: What Leads to Higher Trust and Trustworthiness?

In many market settings, a customer often obtains assistance from a supplier (or service provider) to make better-informed decisions regarding the supplier’s product (or service). Because the two parties often have conflicting pecuniary incentives, customer trust and supplier trustworthiness play important roles in the success of these interactions. We investigate whether and how the process through which assistance is provided can foster trust and trustworthiness, and thus facilitate better cooperation. We compare three prevalent assistance processes: information sharing, advice provision, and delegation. We propose that, even if the pecuniary incentives of both parties do not vary from one assistance process to another, the assistance process itself impacts the customer’s and supplier’s nonpecuniary motives that give rise to trust and trustworthiness. Consequently, the assistance process affects the level of cooperation and payoffs. We test our behavioral predictions through laboratory experiments based on a retail distribution setting. We quantify the impact of different assistance processes on trust, trustworthiness and channel performance, and identify the underlying drivers of those impacts. Our results offer insight into the role of the assistance process in managing supplier assistance effectively and why certain assistance processes may lead to more successful outcomes than others even if the pecuniary incentives remain unaltered. The online appendix is available at https://doi.org/10.1287/mnsc.2016.2617 . This paper was accepted by Vishal Gaur, operations management.

Employee relations and innovation: an empirical analysis using patent data

ABSTRACTThis paper investigates the relationship between employee relations (ER) as tracked in the environment, social, and governance (ESG) database provided by MSCI Inc., and innovation as measured by patents and patent citations. Some ER policies, such as broadly based profit-sharing plans, stock option plans, and stock ownership, create a direct link between a firm’s performance and employee compensation and might therefore be expected to encourage successful innovation. In addition, some other aspects of ER, including good pension plans, good union relations, and a variety of specific benefits (such as flex time) might improve innovation performance through their effect on employee morale or institutional loyalty, or simply by creating incentives to stay with the firm. We find that both of these categories of ER – financial incentives and non-pecuniary motivations – have a positive effect on innovation as measured by patenting and patent citations.

Social Norms and Strategic Default

A significant share of the mortgage defaults in the U.S. during the 2007-2009 crisis were strategic. Survey evidence suggests that the willingness to default strategically is not only determined by financial incentives, but also by non-pecuniary motives such as moral constraints and social norms. In this paper we use experimental methods to shed new light on the behavioral mechanisms underlying the increased tendency to default strategically in an economic crisis. Our design allows us to directly observe the impact of exogenous variation in economic conditions on repayment behavior and norm enforcement. Our data reveals two important results: First, adverse economic conditions soften moral constraints. When economic shocks cause fundamental defaults to surrounding borrowers solvent households are more prone to default strategically. Second, an economic contraction weakens the enforcement of social norms: In a crisis, peers of defaulting households have a hard time distinguishing between strategic and fundamental defaults and are therefore reluctant to punish defaulting households.

Experimental tests of tropical forest conservation measures

We conducted framed field experiments (FFEs) with local forest users in Tanzania. The harvest decisions are well below the individually optimal ones, suggesting significant non-pecuniary motivations. The participants display more pro-social behaviour than similar studies have shown, indicating that the forest specific framing influences participants’ behaviour. We tested three different conservation treatments: command and control (CAC), payment for environmental services (PES) and community forest management (CFM). CFM is as efficient as CAC in increasing pro-social forest use, despite not directly affecting the pecuniary gain. PES – as designed here – is the least effective treatment, but the results might be parameter sensitive. Women use forests more intensively than men, but are also more responsive to the treatments. The behavioural validity of the experiment is supported by strong correlation between behaviour in the experiment and in stated real life, while treatment validity cannot be tested directly. FFEs should become a supplement to traditional impact assessments (IA) of conservation policies, as it avoids many challenges that traditional IA methods face.

Information Sharing, Advice Provision or Delegation: What Leads to Higher Trust in a Distribution Channel?

In many market settings, a customer often obtains assistance from a supplier (or service provider) in order to make better-informed decisions regarding the supplier's product (or service). Because the two parties often have conflicting pecuniary incentives, customer trust and supplier trustworthiness play important roles in the success of these interactions. We investigate whether and how the process through which assistance is provided can foster trust and trustworthiness and facilitate better cooperation. We compare three prevalent assistance processes: information sharing, advice provision, and delegation. We propose that, even if the pecuniary incentives of both parties do not vary from one assistance process to another, the assistance process itself impacts the customer's and supplier's non-pecuniary motives that give rise to trust and trustworthiness. Consequently, the assistance process affects the level of cooperation and payoffs. We test our behavioral predictions through laboratory experiments based on a retail distribution setting. We quantify the impact of different assistance processes on trust, trustworthiness and channel performance, and identify the underlying drivers of those impacts. Our results offer insight into the role of the assistance process in managing supplier assistance effectively, and why certain assistance processes may lead to more successful outcomes than others even if the pecuniary incentives remain unaltered.

Tax Morale

There is an apparent disconnect between much of the academic literature on tax compliance and the administration of tax policy. In the benchmark economic model, the key policy parameters affecting tax evasion are the tax rate, the detection probability, and the penalty imposed conditional on the evasion being detected. Meanwhile, tax administrators also tend to place a great deal of emphasis on the importance of improving “tax morale,” by which they generally mean increasing voluntary compliance with tax laws and creating a social norm of compliance. We will define tax morale broadly to include nonpecuniary motivations for tax compliance as well as factors that fall outside the standard, expected utility framework. Tax morale does indeed appear to be an important component of compliance decisions. We demonstrate that tax morale operates through a variety of underlying mechanisms, drawing on evidence from laboratory studies, natural experiments, and an emerging literature employing randomized field experiments. We consider the implications for tax policy and attempt to understand why recent interventions designed to improve morale, and thereby compliance, have had mixed results to date.

Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms

Scholars have long sought to understand the advantages different types of firms may have in generating innovation. A popular notion is that startup companies are able to attract employees with “fire in the belly,” allowing them to be more productive. Yet research has paid little attention to the motives and incentives of startup employees. This paper compares startup employees’ pecuniary and non-pecuniary motives with those of employees working in small and large established firms and examines the extent to which existing differences in motives distinguish employees’ innovative performance. Using data on over 10,000 U.S. R&D employees, we find significant differences across firm types with respect to motives, although these differences are more nuanced than commonly thought. We also observe that startup employees have higher patent output, an effect that is associated primarily with firm age, not size. Moreover, we find evidence that differences in employee motives may indeed be an important factor distinguishing the innovative performance in startups versus established firms. Rather than intrinsic motives or the quest for money, however, it is employees’ willingness to bear risk that appears to play the most important role. We discuss implications for future research as well as for entrepreneurs, managers, and policy makers.