Understanding the Positive Effect of Financial Compensation on Trust After Norm Violations: Evidence From fMRI in Favor of Forgiveness

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Abstract

Norm violations are ubiquitous in organizations and often result in tangible harm and a loss of trust. One possible response to enhance trust involves the provision of financial compensation. Unfortunately, little is known about the processes that underlie the effect of such a tangible response to increase trust. We employed techniques in cognitive neuroscience (functional magnetic resonance imaging) to examine these processes. Participants placed in the scanner played the role of recipient in a series of dictator games with different allocators who (unknown to them) were preprogrammed. An unequal division of resources was used as a norm violation that resulted in a financial loss. Afterward the inflicted harm was restored through equal financial compensation. Our neuroimaging data indicate that financial compensation activates forgiveness-related brain areas and that this activation mediates the positive effect of financial compensation on trust. We discuss the theoretical and managerial implications of using tangible responses to increase trust in organizational settings.

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