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Jeffrey J. Quirin, David P. Donelly and David OBryan
The concept of organizational commitment has recently impacted the
participative budgeting and employee performance streams of
accounting research. Specifically, a series of studies by Noun, Nouri
and Parker have shown that an individuals level of organizational
commitment negatively impacts budgetary slack and positively
impacts employee performance (Nouri, 1994; Nouri & Parker, 1996a, b,
1998). A related issue, which has seen little attention in accounting
research, is the notion of what causes or antecedes an individuals
level of organizational commitment. The current study attempts to
address this issue by investigating the relationship between an
individual's perception of equity and organizational commitment. Using
a cross-organizational design, measures of perceptions of pay and
performance were gatheredfrom a sample of 105 employees from 15
organizations. In accordance with the study's hypotheses, results
reveal that a significant portion of an individuals organizational
commitment can be explained by his/her perception of pay equity and
workload equity. Additional analysis reveals that perception of equity
has a significant, direct effect on performance, but this effect is fullymediated by organizational commitment.
For die past two decades the concept of organizational commitment
has grown in popularity in the literatures of industrial/organizational
psychology and organizational behavior. The concept has received a
great deal of empirical study both as a consequence and an
antecedent of other work-related variables of interest In theory,
committed employees should work harder, should remain with the
organization, and should contribute to an organizations greater
effectiveness (Mowday, Steers & Porter, 1979). Mowday, Porter and
Steers (1982) suggest that gaining a greater understanding of the
processes related to organizational commitment has implications not
only for employees and organizations, but also for society as a whole.
Society tends to benefit from employees organizational commitment in
terms of lower rates of job movement and, perhaps, higher national
work productivity and/or quality.
The accounting literature has also been impacted by the commitment
construct A series of studies by Noun and Parker have investigated

organizational commitment in a participative budgeting framework.

Nouri and Parker (1996a) find that as an individuals level of
organizational commitment increases that individuals propensity to
create budgetary slack decreases. Results from Nouri and Parker
(1998) reveal that organizational commitment is positively associated
with employee performance. Both of these studies also find that an
individuals level of organizational commitment is associated with the
extent of the individuals budgetary participation. With the exception of
relationship, this series of studies has focused primarily on the
consequences of commitment (e.g. budgetary slack and performance).
The notion of what drives or antecedes an individuals organizational
commitment has received little attention. The current study addresses
this issue by proposing that an individuals perception of equity affects
his/her level of organizational commitment. Perception of equity is an
important concept in work settings and has been linked to a variety of
important behaviors including dissatisfaction, reduced effort, and
willingness to leave the organization (Mowday, 1987).
From an accounting perspective, perception of equity makes a
potentially useful contribution to the participative budgeting literature.
Given that varying degrees of budgetary participation exist and
employee reactions to participation vary a great deal as well, it is
unlikely that every employee who is allowed to participate in the
budget-setting process would become more committed to the
organization as suggested by Noun and Parker (1996a and 1998). It is
more likely that a participating employee's resulting level of
organizational commitment is affected by his/her perceptions of the
participation process. Did the participation process produce a fair
result? Was the employee's input during the participation process ever
utilized in the determination of the final budget? Perceptions regarding
these issues would likely manifest themselves in the employees
overall evaluation of the organization's fairness or equity. Thus, the
employee perception of equity measure could serve as a proxy for
overall participation success and would serve as an antecedent to
commitment in this context.
Two common distinctions have evolved in the commitment research:
behavioral and attitudinal (Brown, 1996). In the behavioral approach, a
person attains a state or position of commitment as a result of
engaging in committing behaviors. Engaging in these behaviors makes
it costly to later reverse a position or disengage from some line of
activity. Thus, to act is to commit oneself (Salancik, 1977). According to
the attitudinal approach, commitment develops as a result of some
common work experiences, perceptions of the organization, and
personal characteristics. These factors lead to positive feelings about

the organization that, in turn, become commitment (Mowday et al.,

1982). The current study follows the latter approach to organizational
commitment in an attempt to identify an additional antecedent to
commitment, which is, in part, manifested through an individual's
perceptions of the organization.
A number of studies in the organizational behavior research have
investigated antecedents to organizational commitment. Age, sex,
education, tenure, ability, and work ethic have all been identified as
personal characteristics which antecede organizational commitment,
while task autonomy, challenge, and scope have been labeled as
influential job characteristics (Mathieu & Zajac, 1990). Similarly,
numerous studies have viewed commitment as the antecedent to
various organizational constructs such as performance, turnover, and
absenteeism (Randall, 1990).
Although a number of antecedents to commitment have been
identified, a majority of them are beyond the employing organizations
control. For example, it is very difficult to justify the hiring of
individuals who are of a certain age or sex. Similarly, any given job task
possesses an inherent degree of autonomy, challenge, and/or scope.
Antecedents that are outside the employers realm of control are
somewhat useless in the sense of practicality. Assuming that high
levels of organizational commitment yield superior work performances,
organizations have an interest in shaping their newly hired workers into
highly committed employees. Thus, identifying antecedents to
commitment which are controllable at the organizational level would
seem to be of great importance to academics and employers alike.
Another limitation of the literature investigating antecedents of
commitment is the single organization perspective in which they are
conducted (Mathieu & Zajac, 1990). Most studies to date which have
investigated such relations, simply sampled employees from a single
organization and correlated their perceptions of the organizational
features and their organizational commitment levels. This is
problematic for two reasons. First, because all employees are sampled
from a single setting, there is little or no variance in their perceptions
of organizational characteristics. Second, previous studies have
examined relationships between aggregate features and organizational
commitment by computing correlations at the individual level of
analysis. In fact, they should be investigated using cross-level designs
(Rousseau, 1985).
The current study
using a sampling
corporations. An
introduced, and a

attempts to avoid the aforementioned limitation by

technique that utilizes subjects from 15 large U.S.
antecedent variable perception of equity - is
causal empirical model linking perception of equity

and organizational commitment is proposed and subsequently tested

using a path analysis technique. To further illustrate the usefulness of
the equity/commitment relationship in an accounting-related context,
an employee performance variable is added to the empirical model.
Results of the main analysis support the hypotheses indicating strong
support for perception of equity as an antecedent to organizational
commitment acts as a mediator variable in the proposed
equity/commitment/performance causal relationship.
Literature identifying antecedents to commitment that are ultimately
controllable by die employing organization is extremely sparse. Work
by Nouri and Parker (1998) effectively identified such antecedents
through a theoretical model which provided linkages between budget
participation, budget adequacy, organizational commitment, and job
performance. In their model, budget participation and adequacy were
viewed as antecedents of organizational commitment, while
performance was depicted as a consequence variable in the overall
relationship. Results of the study indicate that increased budget
participation and budget adequacy lead to higher levels of
organizational commitment. Increased commitment was found to lead
to superior job performance. Although not mentioned in the work of
Nouri and Parker (1998), it is highly unlikely that each employee will
view the participation process as positive and subsequently exhibit
higher levels of organizational commitment. While some employees
may find the participation process extremely gratifying, others may
view participation as being unfair and become disgruntled. Thus, a way
to capture employee perceptions of the participation process and
organization in general would be useful.
Nouri and Parker (1998) note that employee perceptions regarding
resources is extremely important. In fact, the process of establishing
fair and equitable workload and pay practices is one of the more
important activities carried out by organizations. Perception of equity
refers to how equitable individual employees perceive they are treated
in relation to their peers. Perceived equity can refer to either
compensation equity or effort equity (Adams, 1965). If an employees
input-to-outcome ratio is equal to that of either an internally-based
standard or comparison other (i.e. peer), a sense of fairness or equity
results. However, if the ratios are unequal, inequity and the pressure to
restore equity increases.
The research in equity theory has been reviewed many times (e.g.
Carreil & Dittrich, 1978; Mowday, 1987). The data generally support
the notion that perceived inequity results in dissatisfaction and

ultimately impacts work behavior (Sweeney, 1990). In a similar vein,

empirical evidence suggests that an individuals level of pay
satisfaction has a positive impact on organizational commitment
(Balfour & Wechsler, 1996). In a study of antecedents and outcomes of
organizational commitment in the public sector, it was determined that
employees who were more satisfied with their salary were more likely
to possess higher levels of organizational commitment. A similar study,
taking place in a university setting, examined the effects of a
restructuring of job classifications (Lowe & Vodanovich, 1995). It was
found that distributive justice (outcome fairness) factors as a result of a
restructuring played an important role in employees resulting levels of
commitment can be modeled as a function of both pay and outcome
Given that employees can perceive an inequity with respect to pay and
workload (effort), it is important to not only distinguish between the
two, but also to understand the relationship between the two (Adams,
1965). Furthermore, since research exists which supports the notion of
multiple comparisons (internal and external) for the purposes of
forming equity perceptions (Hills, 1980), for measurement purposes it
is useful to effectively capture an employees reference point for
forming such perceptions.
In light of the previous findings, which indicate that perception of
equity has an impact on employee work behavior and that pay
satisfaction and distributive justice factors play antecedent roles in
organizational commitment contexts, the following hypotheses (stated
in the alternative form) can be formed;
HI: An individuals perception of pay equity has a positive effect on
their level of organizational commitment.
H2: An individuals perception of workload (effort) equity has a positive
effect on their level of organizational commitment.
Following prior literature (e.g. DeCotiis & Summers, 1987; Randall,
1990; Nouri & Parker, 1998), a positive linkage can also be expected to
exist between organizational commitment and employee performance.
The following hypothesis results;
H3: An individuals level of organizational commitment has a positive
impact on their performance.
Furthermore, existing equity theory literature suggests that perception
of equity should have a direct impact on employee performance as well
(Carrell & Dittrich, 1978; Mowday, 1987). This leads to the following

H4: An individuals perception of pay equity has a positive impact on

their performance.
H5: An individuals perception of workload (effort) equity has a positive
impact on their performance.
The preceding hypotheses are summarized in Fig. 1.
Data Collection
In order to allow for cross-organizational generalizability, data was
collected using a survey questionnaire sent to a total of 240 managers
from a cross-section of 15 large U.S. companies. Companies were
selected based upon the number of employees they employed who
were graduates of a large, mid-western public university. The sample of
companies represented a variety of industries. Some examples of the
companies represented in the sample include AT&T, Boeing, Conoco,
General Electric, IBM, Payless Shoe Source, Phillips Petroleum,
Southwestern Bell Telephone, Sprint, and Wal-Mart. Employees who
received surveys were randomly selected from an alumni database at
the university. Sixteen employees from each of the 15 companies were
sent questionnaires. Respondents possessed degrees from a variety of
functional areas including accounting, finance, marketing, and
production operations.
A survey instrument package was distributed directly to each potential
respondent and returned via mail. Accompanying each questionnaire
was a cover letter containing an explanation of the research, as well as
instructions for completing the survey. A self-addressed, stamped
envelope was also included.
Of the 240 surveys distributed, respondents returned a total of 105
usable surveys for a response rate of 44%. The average respondent
was 39 years old, had 16 years of work experience, and supervised 29
employees in their organization.
The variables measured in the questionnaire include perception of
equity (both pay and workload), organizational commitment, and job
performance were drawn from the literature, but measures of
perception of pay and workload equities required development.
A number of studies have utilized a survey instrument to measure an
individual's perceptions of pay or workload equity in a held study
setting (Wicker & Bushweiler, 1970; Hills, 1980; Berkowitz, Fraser,

Treasure & Cochran, 1987; Greenberg, 1989). Although most of these

instruments stem from the original equity theory work of Adams
(1965), no one survey instrument was designed to measure both pay
and workload perceptions across a number of internal as well as
external referents. Numerous referent others for the purposes of pay
and workload comparisons include others within the organization at the
same level, other employees within the organization at lower levels, a
supervisor within the organization, other employees doing similar types
of work in other organizations, and an internal standard based upon a
verbal agreement with the employer at the time of hiring (Goodman,
1974; Hills, 1980; Sweeney, 1990). A 10-item, two-part perception-ofequity instrument was designed to measure the required information in
an organizational setting. Five items relate to the pay equity construct,
while the remaining five relate to workload equity. This research
instrument is reported in the Appendix. The items in the instrument
were developed from a review of prior literature in the equity theory
area (Wicker & Bushweiler, 1970; Berkowitz et al., 1987; Hills, 1980;
Greenberg, 1989). The items were designed on a seven-point Likerttype scale anchored by; 1 - strongly disagree; and 7 - strongly agree.
Questions were written so that a response of 7 indicates a high
perception of equity.
A principal components, orthogonal rotation factor analysis of the
instrument indicated that all five pay-equity items loaded above 0.6 on
a single factor. All five workload-equity items also loaded on a single
factor at the 0.6 level . Eigenvalues for the pay-equity and workloadequity factors were 3.487 and 3.125, respectively. The analysis
indicated that crossloadings of the questions from the two separate
factors were not problematic. Further analysis was done to ascertain
the instrument's reliability. The Cronbach alpha for the 10-item
measure was 0.94, while the reliability alphas for the individual pay
and workload portions of the survey were 0.89 and 0.92 respectively.'
Table 1 reports descriptive statistics for the measure.
Mowday et al.s (1979) nine-item short-form instrument was used to
measure organizational commitment.2 This research instrument is also
reported in the Appendix. The instrument was written in a seven-point
Likert-type format ranging from: 1 - strongly disagree; to 7 - strongly
agree. A response of 7 indicates a high level of organizational
commitment. Prior studies report acceptable levels of reliability and
validity for the nine-item instrument (Blau, 1987; Nouri Sc Parker,
1998). In this study, the Cronbach alpha was 0.92. Table 1 reports
descriptive statistics for the measure.

Performance was measured using Mahoney et al.s (1963,1965) multidimensional nine-item instrument. Respondents were asked to evaluate
their individual performance with regard to eight performance
dimensions, such as planning, coordinating, supervising, and staffing.
Respondents were then asked to rate their overall performance in the
final question. This instrument is reported in the Appendix. The
instrument was constructed using a seven-point Likert-type scale
ranging from: 1 - well below average; to 7 - well above average. Prior
studies report acceptable levels of reliability and validity for the
Mahoney et al. (1963, 1965) instrument (Heneman, 1974; Lau, Low &
Eggleton, 1995). hi this study, the Cronbach alpha was 0.94.
Descriptive statistics for the measure can be found in Table 1.
Although several studies have criticized self-reported measures of
performance as unreliable due to leniency bias (e.g. Parker, Taylor,
Barrett & Martens, 1959), other studies have noted that leniency bias is
inconsequential unless the bias is systematically related to an
independent variable (Chenhall & Brownwell, 1988; Kren, 1992). The
use of self-reported measures also minimizes the halo effect that
may occur with superior ratings (Nealy & Owen, 1970; Heneman,
Halo effects result from the tendency to evaluate globally* or for
managers to evaluate using only one cognitive dimension.
Path Analysis
Path analysis was used to evaluate the proposed hypotheses. The path
model used in the analysis corresponds to the model in Fig. 1. In Fig. 1,
each link between the variables has a path coefficient that measures
the impact of the antecedent variable in explaining the variance in the
outcome variable. For example, the path coefficient for the link
between perception of equity and organizational commitment indicates
the increase in organizational commitment, measured in standard
deviations, associated with a one standard deviation increase in
perception of equity. Values for the path coefficients were estimated
using regression and correlation analysis (Asher, 1983). The path
coefficient value is the standardized beta coefficient found by
regressing the outcome variable on the appropriate antecedent
Main Analysis
Table 2 presents the correlation matrix for the variables. Table 3
presents the results of the main analysis and lists each hypothesis and

its corresponding path coefficient, each of which were estimated using

regression or correlation analysis.
Hypotheses 1 and 2 predict that perceptions of pay and workload
equity act as antecedents to organizational commitment. The path
coefficients related to these hypotheses are both positive and
significant at the p < 0.01 level. Interpretations of the path coefficients
regarding these two hypotheses are very interesting. Examination of
the perception of pay equity construct reveals a one standard deviation
increase in perception of equity results in a 0.426 standard deviation
increase in organizational commitment A similar interpretation is
obtained for perception of workload equity. Given the size of the pad)
coefficient and the resulting level of significance for the paths, the
results indicate a strong antecedent effect and provide support for
Hypotheses 1 and 2.
Hypothesis 3 predicts that organizational commitment has a positive
impact on performance. The path coefficient linking organizational
commitment to performance is positive and significant at the p < 0.01
level. This result supports Hypothesis 3.
Hypotheses 4 and S predict that an individuals perception of equity
has a positive impact on performance. The path coefficients linking
perceptions of pay and workload equity to performance are both
positive and significant at the p < 0.05 level. Although die effects of
perception of equity on organizational commitment are very high, it
appears that the effects of equity on performance are somewhat less
extensive. Nonetheless, support for Hypotheses 4 and 5 is found.
Supplemental Analysis
Given the prior findings that individuals' perceptions of equity affect
their level of organizational commitment, that their organizational
commitment directly affects performance, and that perception of
equity also affects performance to a lesser extent, an additional
analysis was undertaken to further investigate the relationship among
an individuals perception of equity, organizational commitment, and
performance. This additional analysis is illustrated in Fig. 2, in which
organizational commitment is modeled as a mediating variable in the
equity theory/performance relationship.
Results of the additional analysis are reported in Table 4. Since the path
linking perception of equity to organizational commitment is still direct
in nature (no other antecedents are involved), no further analysis is
required to produce those path coefficients (the coefficients used for
Hypotheses 1 and 2 can still be relied upon). However, the paths
linking both organizational commitment to performance and perception

of equity to performance do require new analysis. The results reveal

that the linkages between organizational commitment and
performance are still positive and significant. In the perception of pay
equity model, the path is significant at the p < 0.05 level, while the
path coefficient in the perception of workload equity model remains
significant at the p < 0.01 level. The path coefficient linking perception
of pay equity to performance is now positive (0.104) but insignificant. A
similar result is found for the perception of workload equity to
performance relationship.
In aggregate, these results suggest that perception of equity appears
to possess a significantly positive, direct effect on performance
(Hypotheses 4 and 5), but this effect decreases when organizational
commitment is added to the model. This suggests that organizational
commitment fully mediates the relationship between perception of
equity and performance. Baron and Kenny (1986) argue that given a
significant bivariate relationship between an independent variable and
an outcome variable, a third variable functions as a mediator when: (1)
the independent variable is significantly related to the mediating
variable; (2) the mediating variable is significantly related to the
outcome variable; and (3) the relationship between the independent
variable and outcome variable decreases after controlling for the
mediator variable. These conditions are fulfilled with regard to
perception of equity and performance and the proposed mediating
variable organizational commitment. As Baron and Kenny (1986) note,
full mediation occurs when the relationship between the independent
variable and outcome variable is no longer significant after controlling
for the mediating variable (as in this case). They note that in most
social psychology instances researchers are more likely to find partial
rather than full mediation. The current results do support full
Research in the organizational commitment area has recently grown in
popularity in the behavioral accounting literature (e.g. Nouri, 1994;
Nouri & Parker, 1996a, b, 1998). The construct has been the focal point
of research both as a consequence and as an antecedent variable. It
has been suggested that organizational commitment has implications
for employees, organizations, and society as a whole (Mowday et al.,
Following the attitudinal approach to organizational commitment,
which asserts that an individual's commitment develops, in part, as a
result of perceptions of the organization, this study identifies
perception of equity m an additional antecedent to organizational
commitment. The study finds that an individual* s perceptions of both

pay and workload equity are able to account for a significant portion of
the variation in organizational commitment.
Results of this study also indicate that perception of equity has a direct
impact on performance However, this effect is mediated by
organizational commit mne when organizational commitment is
entered into a path model. These results are based upon a crossorganizational research design consisting of individuals at wious career
This study possesses a number of limitations. First, survey studies are.
by nature, subject to both lack of control limitations and potential bias
associated with seif-reporting. Second, problems of omitted and
uncontrolled intervening or moderating variables may also exist. Third,
the sample of employees was gathered from a database of alumni from
one mid-western university. To the extent that graduates of this
university do not represent the population of employees found in the
overall corporate environment, the results may not be representative.
Finally, in interpreting the results of this study, causality must be
considered. Although alternative methodologies, such as experiments,
may be able to provide more information about causality, their ability
to model complex organizational behavior may be limited. With respect
to this study, a laboratory experiment may be able to yield more
causality than a survey approach, but simulating organizational
commitment in a laboratory setting would be difficult
Given that a linkage between budgetary participation and
organizational commitment has been established in prior literature, the
equity/organizational commitment relationship revealed in this study is
quite intuitive. In the context of participative budgeting, it is likely that
participation that is deemed successful by employees has a much
different affect on commitment than participation that is deemed
unsuccessful. It is possible that employee perceptions regarding the
participation process are captured in a perception of equity measure
and these perceptions subsequently affect organizational commitment.
Thus, organizations concerned with employee commitment and
subsequently increased performance should not only address potential
pay and workload inequities resulting from their organizational
structure, but also design budgetary participation schemes which are
deemed successful by employees.
The results of this research are also useful to researchers of both
equity theory and organizational commitment. The study provides
researchers with a survey instrument which measures perceptions of
both pay and workload (effort) equities. In light of perception of
equitys strong impact on organizational commitment, future research
is needed to investigate the impact of equity on other existing

behavioral -based variables such as professional commitment and job

satisfaction, as well as the increased role of perception of equity in
explaining individual behavior within the organization.
1. Although it is likely that many respondents may not have accurate
or complete information about their referent others pay, the
construct of interest is perception of equity and the authors believe
this measure reliably captures perceptions. Perceptions may or
may not be justified by the hard data, but it is hypothesized that an
employees perceptions of equity are the driving force that
influence organizational commitment and performance.
2. Additional organizational commitment measures frequently utilized
in the literature include those developed by Angle and Perry (1983)
and Meyer and Allen (1984). Due to its apparent relevance to
accounting-related issues, the recent accounting literature
investigating organizational commitment has overwhelmingly
employed the Mowday et al. (1979) measure of organizational
commitment (Blau, 1987; Noun, 1994; Nouri & Parker, 1996a, b,
3. As shown in die Appendix, information regarding four demographic
variables was collected. An additional analysis (not presented)
reveals that an individuals age and years experience do have a
significant impact on organizational commitment. However,
including the four demographic variables, age, gender, years
experience, and number of employees supervised does not affect
the strong antecedent effect of perception of equity on
organizational commitment.