Hypothesis 3 predicts that the relationship between measurement diversity and firm performance was mediated by the effectiveness of the reward system. The mediation effect of reward system effectiveness is analysed using Equations (2) and (3) (Venkatraman, 1989).(2) RWEFF = α + α 1FSIZE + α 2MDIV + ε(3) Y = β0 + β1FSIZE + β2IND_M + β3IND_E + β4IND_W + β5IND_T +β6IND_F + β7MDIV + β8RWEFF + εAs explained in Chapter 4, if the α2 coefficient in Equation (2) is statistically significant and the β7 coefficient in Equation (3) is not statistically different from zero, then the mediating effects of reward system effectiveness will be strongly supported. As Venkatraman (1989) indicates, this would imply that the presence of RWEFF is necessary for the transmission of effects of MDIV on Y. If this occurs the relationship is referred to as a “complete mediation model” (Venkatraman, 1989, p. 430). If the α 2 coefficient in Equation (2) is statistically significant and the β7 coefficient in Equation (3) is also statistically significant, then a direct effect between measurement diversity and firm performance exists, and an indirect effect between measurement diversity and firm performance through reward system effectiveness exists, which implies a “partial mediational model” (Venkatraman, 1989, p. 430).Table 5-5 presents the results of the logistic and OLS regression analyses conducted to test this hypothesis. Firstly, the signs and statistical significance of the unstandardised beta coefficients of measurement diversity and reward system effectiveness are examined in the different regression models. Data show that when firm performance is measured as business goals achievement (BGOALS), reward system effectiveness positively affects firm performance. When firm performance is measured as return on assets (ROA) and sales growth (SALESG), reward system effectiveness is negatively related to firm performance. However none of the unstandardised beta coefficients of reward system effectiveness is statistically significant. This indicates that they could be zero, which is sufficient to show that Hypothesis 3 is not supported by the data. Chapter 5. Research findings Table 5-7 Hypothesis 3: Results of regression analyses of MDIV and RWEFF as predictors of the firm performance measures 1,2
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