The roles of tacit knowledge and OCB in the relationship between group-based pay and firm performance

Abstract

Researchers have suggested various mechanisms through which group-based pay may affect firm performance, but few have provided direct empirical field tests of these mechanisms. In this paper, we argue that group-based pay systems lead to more organisational citizenship behaviours (OCB) and facilitate the sharing and creation of tacit knowledge among core employees. OCB and tacit knowledge in turn enhance firm performance. Regression results show that group-based pay is positively related to firm performance and that the relationship is partially mediated by core employees' OCB. We discuss implications for compensation theory and research. © 2009 Blackwell Publishing Ltd.