Legitimate Decision Authority and Motivation in Organizations

The allocation of decision rights—and the decision hierarchies it creates—shape incentives in organizations and thus individual motivation. We study whether the motivational effects of decision hierarchies go beyond pecuniary incentives and how they relate to the perceived legitimacy of the decision hierarchy. In a laboratory experiment, we exogenously manipulate the payoff structure of an organization in a way that leaves the pecuniary incentives of all involved parties unaffected but shifts subordinates’ perceived legitimacy of the decision hierarchy. Our data show that subordinates’ motivation to provide effort is causally affected by the organizational payoff structure, and significantly associated with the perceived legitimacy of the decision hierarchy.