H2a hypothesizes that the firm’s pay structure moderates the relation between labor intensity and
the use of non-financial measures in bonus compensation. Pay structure is described as a moderating
variable because there is no theoretical, ex ante reason, to expect that the relation between the use of
non-financial measures will differ for egalitarian firms versus hierarchical firms. Accordingly, there is no
hypothesis for the significance and sign of EGAL. EGAL is, however, included in the model (as a direct
effect) since it aids in the interpretation of the interaction or moderating variable (Judd and McClelland,
1989). To provide evidence on H2a I expect that INTER will have a negative coefficient, indicating that
the likelihood that firms will use non-financial measures in bonus compensation when they are labor
intensive is even stronger when the firm’s pay structure is hierarchical.21