Losers of Executive Promotion Tournaments: Their Incentives, Turnover, and Career Outcomes

The Effects of Incentive Scheme and Task Difficulty on Employees' Altruistic Behavior Outside the Firm

“…Understanding the profound impact tournaments have on behavior of non‐winning employees is important because this group includes the majority of employees in many tournaments in practice (Cason et al ; Chan et al ; Choi, Newman et al ) as often in tournaments “rewards tend to be concentrated only in the hands of a few top performers, with small differences in talent or effort often giving rise to enormous differences in incomes” (Frank and Cook , 24) . For instance, although a winner‐take‐all tournament might be better at motivating performance on the contracted task relative to other incentive structures, our study highlights that the payoff structure of such tournaments also creates feelings of entitlement that ultimately lead to less altruism outside the firm when the incentivized task is more difficult.…”

“…Although a study by Chan et al () that examines tournaments for promotion to Chief Operating Officer finds that in their sample about 30 percent of executives who fail to obtain promotion leave the firm, as assumed by Cardinaels et al (), non‐winning employees may instead choose to remain with the firm because of inertia, lack of information, and high job‐switching cost.…”