Does pay level always work? The roles of pay dispersion and the level of human resources in the case of NBA teams

Philsoo Kim and Sanghyun Lee

Evidence-based HRM, 2025, vol. 14, issue 4, 835-853

Abstract: PurposeThis study aims to reconcile conflicting findings in the compensation literature by investigating how salary levels, intrateam pay dispersion and superstar player concentration jointly influence organizational performance in National Basketball Association (NBA) franchises.Design/methodology/approachA longitudinal panel of six seasons (2015–2016 through 2020–2021) for all 30 NBA teams was analyzed using a moderated mediation framework. We tested the conditional indirect effects of team salary level on franchise value, mediated by annual financial performance and moderated by pay dispersion and superstar concentration, using Hayes’s PROCESS macro in SPSS 26.0.FindingsLarger payrolls are positively associated with greater annual revenue growth and higher franchise valuations. The indirect effect of salary level on franchise value through annual revenue is significantly stronger when intrateam pay dispersion is low. Furthermore, having more superstar players on a team offsets the adverse performance impact of pay dispersion, thereby preserving the positive relationship between pay and performance.Originality/valueBy integrating tournament theory and equity theory perspectives and by highlighting superstar players as a distinct referent group, this study reconciles prior inconsistencies in findings on pay dispersion. Its rigorous moderated mediation analysis advances the understanding of compensation dynamics in human resource management and offers practical guidance for designing pay structures that balance internal fairness with strategic performance objectives.

Keywords: Equity theory; Organizational performance; Pay structure; Tournament theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ebhrmp:ebhrm-11-2024-0398

DOI: 10.1108/EBHRM-11-2024-0398

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