THE PERFORMANCE IMPLICATIONS OF RESOURCE AND PAY DISPERSION: THE CASE OF MAJOR LEAGUE BASEBALL

Research summary: Building on research in strategic management that has found that high levels of pay dispersion are detrimental to firm performance; we examine the potential dependence of those findings on similar dispersion in the latent potential of those resources to contribute to performance. We find that congruence between resource value dispersion and pay dispersion is positively related to organizational performance. Additionally, we find that this congruence moderates the effects of both organizational resources and organizational pay levels on organizational performance. These findings contribute to a growing line of research that explores the implications of key human resource value and pay combinations for organizational performance. Managerial summary: While differences in income between key employees (i.e., dispersed pay) can instill feelings of inequity and be detrimental to organizational performance, such differences may also increase the odds of attracting star talent and help performance. In the context of Major League Baseball (MLB), we find that performance improves when dispersions in pay are congruent with the dispersion in the contributions that team members make to their organizations. We also find that the positive effects on performance of higher total pay and of level of organizational talent are enhanced by congruent pay and contribution dispersions. These findings suggest organizations may benefit from consistent dispersions in pay and talent and that important contributions by key organizational members need to be visible when organizations have dispersed pay structures.