Essays on Leadership: Incentives, Legitimacy, and Goal Setting Von der Fakultät für Wirtschaftswissenschaften der Rheinisch-Westfälischen Technischen Hochschule Aachen zur Erlangung des akademischen Grades eines Doktors der Wirtschafts- und Sozialwissenschaften genehmigte Dissertation vorgelegt von Martin Scheuermann, M.Sc. Berichter: Univ.-Prof. Dr. rer. pol. Christine Harbring Univ.-Prof. Dr. rer. pol. Christian Grund Tag der mündlichen Prüfung: 28.05.2020 Diese Dissertation ist auf den Internetseiten der Universitätsbibliothek online verfügbar. Der Abschnitt „Part I: Leadership in combination with individual rewards and punishments“ ist veröffentlicht unter: Gürerk, Özgür; Lauer, Thomas; Scheuermann, Martin (2018). Leadership with individual rewards and punishments. Journal of Behavioral and Experimental Economics 74, 57–69. DOI: 10.1016/j.socec.2018.03.007. The true method of knowledge is experiment. (William Blake, 1757 - 1827) i ACKNOWLEDGMENTS During my time as a PhD student I had not only one, but two supervisors to whom I am very grateful. For most of the time I was supervised by Özgür Gürerk, who guided me through my first two research projects and enabled me to publish my first scientific paper. Özgür, thank you very much for your patience and support. When I needed a new supervisor, I was glad that Christine Harbring agreed to step into the role for the remainder of the time. Thank you, Christine, your supporting feedback and encouragement in the final phase really helped me a lot. Special thanks go to Thomas Lauer for collaborating on my first two projects and helping me with his profound expertise in econometrics. My thanks also go to Christian Grund, who made himself available as a reviewer for this dissertation. As a research associate, I had the pleasure of being surrounded by wonderful colleagues. I am thankful to Andreas Staffeldt, Britta Butz, Frederik Graff, Jan Wilhelm, Luca Carduck- Eick, Lucas Braun, Maik Theelen, and Nicolas Meier, for creating such a pleasant atmosphere and many joyful memories. Regarding Part III of this dissertation, I express my gratitude to Jan Wilhelm, who initially approached me with the underlying idea. Although it was intended as a joint project, Jan left research to pursue other goals, so I wrote the paper on my own. Jan, I hope you are satisfied with the result. I further thank our secretary Anja Uttich who assisted in many ways and Christine Stibbe for transforming my English into a comprehensible form. Finally, I would like to thank my friends and family on whose support I could always rely. ii TABLE OF CONTENTS Acknowledgements .................................................................................................. i Table of Contents..................................................................................................... ii Index of Tables ........................................................................................................ v Index of Figures ..................................................................................................... vii Index of Abbreviations ........................................................................................... ix INTRODUCTION ......................................................................................................... 1 1 Project Overview .............................................................................................. 7 1.1 Part I - Leadership in combination with individual rewards and punishments .......................................................................................... 7 1.2 Part II - Legitimacy in the lab: The effects of leader selection and information on team performance ........................................................ 9 1.3 Part III - Goal setting and team performance ..................................... 11 1.4 Discussion and outlook ....................................................................... 13 PART I: LEADERSHIP IN COMBINATION WITH INDIVIDUAL REWARDS AND PUNISHMENTS .................................................................................................. 16 2 Introduction .................................................................................................... 16 3 Related Literature ........................................................................................... 18 3.1 The mechanics of leading-by-example ............................................... 18 3.2 Leading-by-example experiments without rewards or punishments .. 19 3.3 Experiments with centralized rewards or punishments in simultaneous settings ................................................................................................ 20 3.4 Experiments with centralized rewards or punishments in sequential settings ................................................................................................ 21 4 Experimental Design ...................................................................................... 22 4.1 Treatments .......................................................................................... 22 4.2 The game ............................................................................................ 22 4.3 The procedures .................................................................................... 24 Table of Contents iii 5 Hypotheses ..................................................................................................... 24 6 Results ............................................................................................................ 25 6.1 The effect of leadership on contributions in the absence of rewards or punishments ........................................................................................ 25 6.2 The effect of rewards and punishments on contributions in the absence of leaders ............................................................................................. 26 6.3 The effect of leaders on contributions in the presence of rewards or punishments ........................................................................................ 27 6.4 Evolution of contributions and individual contribution behavior ....... 28 6.5 The use of rewards and punishments .................................................. 31 6.6 Payoffs ................................................................................................ 37 7 Discussion and Conclusion ............................................................................. 39 Appendix A............................................................................................................ 41 PART II: LEGITIMACY IN THE LAB: THE EFFECTS OF LEADER SELECTION AND INFORMATION ON TEAM PERFORMANCE ........................................................... 47 8 Introduction .................................................................................................... 47 9 Related Literature ........................................................................................... 49 9.1 Leader appointment and cooperation in experiments ......................... 49 9.2 Information and cooperation in experiments ...................................... 51 9.3 Theoretical considerations and hypotheses ........................................ 51 10 The Game and Experimental Design .............................................................. 53 10.1 Leader appointment ............................................................................ 54 10.2 Procedures........................................................................................... 55 11 Results ............................................................................................................ 55 11.1 The effect of endogenous leader election ........................................... 57 11.2 The effect of information about the leader’s past behavior ................ 58 11.3 The combined effect of both sources of legitimacy ............................ 59 11.4 Leader and follower behavior ............................................................. 60 11.5 Ex-post legitimization ......................................................................... 64 12 Discussion ....................................................................................................... 65 13 Conclusion ...................................................................................................... 67 Table of Contents iv Appendix B ............................................................................................................ 68 PART III: GOAL SETTING AND TEAM PERFORMANCE ............................................... 72 14 Introduction .................................................................................................... 72 15 Related Literature ........................................................................................... 73 15.1 Goal setting theory .............................................................................. 73 15.2 Meta-analyses ..................................................................................... 74 15.3 Experimental studies ........................................................................... 75 16 Experimental Design and Procedures ............................................................. 77 16.1 The game ............................................................................................ 77 16.2 The treatments .................................................................................... 79 16.3 Procedures..........................................................................................