Social Connections and Incentives in the Workplace: Evidence from Personnel Data

By O. Bandiera, I. Barankay, Imran Rasul. Social Science Research Network, 2009

462 citations recorded by the source corpus.

We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort toward high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.

Subfields: Safety Research, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/344acb56d8c0c08a77325a81a040dbb51258e238

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Citations in the corpus

Do Job Networks Disadvantage Women? Evidence from a Recruitment Experiment in Malawi (2018, unknown): “123 into the firm.”
Social Incentives in Organizations (2018, background): “Bandiera et al. (2009) study how managers allocate effort across workers in a fruit farm.”
Team Incentives and Performance: Evidence from a Retail Chain (2015, unknown): “However, in stark contrast to individual incentives that have been shown to work well in the field (Lazear, 2000; Shearer, 2004; Bandiera et al., 2009), the jury on the effectiveness of team incentives is still out (Bloom and Van Reenen, 2011).”
Job Referral Networks and the Determination of Earnings in Local Labor Markets (2014, methodology): “Nevertheless, as in Bayer et al. (2008), some sorting remains, leaving open the question of whether, and to what extent, the results are driven by sorting on unobservables.”
Who Gets the Job Referral? Evidence from a Social Networks Experiment (2012, methodology): “As was made explicit in the theoretical framework, OPs face extensive and intensive margin choices.”
Types of Contact: A Field Experiment on Collaborative and Adversarial Caste Integration (2021, background): “…match should weaken the adversarial effect much more than the collaborative effect: without stakes, motives should shift away from picking the best cricketers, and toward picking those that are fun to play with ( Bandiera, Barankay, and Rasul 2009 , reducing the adversarial contact effect more.”
Human Resource Management and Productivity (2010, background): “Examining the mechanism through which this happened, Bandiera et al (2009a) gathered information on social connections from their survey.”