Performance-based incentives and innovative activity in small firms: evidence from German manufacturing

Journal of Organization Design - Tập 11 - Trang 47-64 - 2022
Karl Aschenbrücker1, Tobias Kretschmer1,2
1Institute for Strategy, Technology and Organization, LMU Munich, Munich, Germany
2Center for Economic Policy Research (CEPR), London, UK

Tóm tắt

How are financial incentives and innovative activity linked? We analyze how firms’ use of financial incentives is associated with their employees’ innovative activity. The presence and transparency of financial incentives matter for the link between incentives and innovative activity, just like the activity profile of those receiving incentives. In a study of managers and workers in small German manufacturers, we find that financial incentives and explorative and exploitative innovative activity do interact. Financial incentives for managers (workers) are positively (negatively) associated with exploitative innovative activity, and negatively with exploratory innovative activity for both groups of employees. Furthermore, a transparent compensation system counteracts the negative association of financial incentives for workers on innovation activity, especially exploration. Our study qualifies the claim that extrinsic motivation crowds out innovative activity and specifies under which conditions the use of financial incentives in a firm is associated with different degrees of organizational exploitative and explorative innovative activity.

Tài liệu tham khảo

Ahuja G, Lampert CM, Tandon V (2008) Moving beyond Schumpeter: management research on the determinants of technological innovation. Acad Manag Ann 2:1–98 Amabile TM (1996) Creativity in context: update to “the social psychology of creativity.” Westview Press, Boulder Amabile TM (1997) Motivating creativity in organizations: on doing what you love and loving what you do. Calif Manage Rev 40:39–58 Amabile TM, Pillemer J (2012) Perspectives on the social psychology of creativity. J Creat Behav 46:3–15 Andriopoulos C, Lewis MW (2009) Exploitation-exploration tensions and organizational ambidexterity: managing paradoxes of innovation. Organ Sci 20:696–717 Armstrong JS, Overton TS (1977) Estimating nonresponse bias in mail surveys. J Market Res 14:396–402 Aschenbrücker K, Kretschmer T (2018) Balanced Control as an Enabler of Organizational Ambidexterity, In: Organization Design, Advances in Strategic Management. Emerald Publishing Limited, p. 115–144 Audia PG, Locke EA, Smith KG (2000) The paradox of success: an archival and a laboratory study of strategic persistence following radical environmental change. Acad Manag J 43:837–853 Auh S, Menguc B (2005) The influence of top management team functional diversity on strategic orientations: the moderating role of environmental turbulence and inter-functional coordination. Int J Res Mark 22:333–350 Balkin DB, Markman GD, Gomez-Mejia LR (2000) Is CEO pay in high-technology firms related to innovation? Acad Manag J 43:1118–1129 Bandiera O, Barankay I, Rasul I (2007) Incentives for managers and inequality among workers: evidence from a firm-level experiment. Quart J Econ 122:729–773 Baumann O, Stieglitz N (2014) Rewarding value-creating ideas in organizations: the power of low-powered incentives. Strateg Manag J 35:358–375 Beckman CM, Haunschild PR, Phillips DJ (2004) Friends or strangers? Firm-specific uncertainty, market uncertainty, and network partner selection. Organ Sci 15:259–275 Benner MJ, Tushman ML (2003) Exploitation, exploration, and process management: the productivity dilemma revisited. Acad Manag Rev 28:238–256 Bloom N, Van Reenen J (2007) Measuring and explaining management practices across firms and countries. Quart J Econ 122:1351–1408 Bloom N, Kretschmer T, Van Reenen J (2011) Are family-friendly workplace practices a valuable firm resource? Strateg Manag J 32:343–367 Bresnahan TF, Brynjolfsson E, Hitt LM (2002) Information technology, workplace organization, and the demand for skilled labor: firm-level evidence. Quart J Econ 117:339–376 Brynjolfsson E, Hitt L, (1998) Information Technology and Organizational Design: Evidence from Micro Data. Working Paper, MIT Cambridge, MA Cardinal LB (2001) technological innovation in the pharmaceutical industry: the use of organizational control in managing research and development. Organ Sci 12:19–36 Charness G, Grieco D (2019) Creativity and financial incentives. J Eur Econ Assoc 17:454–496 Colombo MG, Delmastro M (1999) Some stylized facts on organization and its evolution. J Econ Behav Organ 40:255–274 Damanpour F (1991) Organizational innovation: a meta-analysis of effects of determinants and moderators. Acad Manag J 34:555–590 Deci EL, Ryan RM (1985) The general causality orientations scale: self-determination in personality. J Res Pers 19:109–134 Dosi G (1988) Sources, procedures, and microeconomic effects of innovation. J Econ Lit 26:1120–1171 Duncan RB (1976) The Ambidextrous organization: designing dual structures for innovation. In: Kilmann RH, Pondy LR, Slevin D (eds) The management of organization. North-Holland, New York, pp 167–188 Ederer F, Manso G (2013) Is pay for performance detrimental to innovation? Manage Sci 59:1496–1513 Failla V, Amore M (2020) Pay dispersion and executive behaviour: evidence from innovation. Br J Manag 31:487–504 Fairbank JF, Williams SD (2001) Motivating creativity and enhancing innovation through employee suggestion system technology. Creat Innov Manag 10:68–74 Fleming L, Sorenson O (2001) Technology as a complex adaptive system: evidence from patent data. Res Policy 30:1019–1039 Gibson CB, Birkinshaw J (2004) The antecedents, consequences, and mediating role of organizational ambidexterity. Acad Manag J 47:209–226 Gold AH, Malhotra A, Segars AH (2001) Knowledge management: an organizational capabilities perspective. J Manag Inf Syst 18:185–214 Gomez-Mejia LR, Larraza-Kintana M, Makri M (2003) The determinants of executive compensation in family-controlled public corporations. Acad Manag J 46:226–237 Goold M, Quinn JJ (1990) The paradox of strategic controls. Strateg Manag J 11:43–57 Gupta AK, Smith KG, Shalley CE (2006) The interplay between exploration and exploitation. Acad Manag J 49:693–706 Haas MR (2010) The double-edged swords of autonomy and external knowledge: analyzing team effectiveness in a multinational organization. Acad Manag J 53:989–1008 Hackman JR, Oldham GR (1976) Motivation through the design of work: test of a theory. Organ Behav Hum Perform 16:250–279 He Z-L, Wong P-K (2004) Exploration vs. exploitation: an empirical test of the ambidexterity hypothesis. Organ Sci 15:481–494 Heiner RA (1986) Uncertainty, signal-detection experiments, and modeling behavior. Langlois (ed.): Economics as a Process. Essays in the New Institutional Economics 59–115 Hitt LM, Brynjolfsson E (1997) Information technology and internal firm organization: an exploratory analysis. J Manag Inf Syst 14:81–101 Hitt MA, Ireland RD, Camp SM, Sexton DL (2001) Strategic entrepreneurship: entrepreneurial strategies for wealth creation. Strateg Manag J 22:479–491 Hitt MA, Ireland RD, Sirmon DG, Trahms CA (2011) Strategic entrepreneurship: creating value for individuals, organizations, and society. Acad Manag Perspect 25:57–75 Hossain T, List JA (2012) The behavioralist visits the factory: increasing productivity using simple framing manipulations. Manage Sci 58:2151–2167 Huber GP (1991) Organizational learning: the contributing processes and the literatures. Organ Sci 2:88–115 Hull F, Hage J (1982) Organizing for innovation: beyond burns and stalker’s organic type. Sociology 16:564–577 Ireland RD, Hitt MA, Sirmon DG (2003) A model of strategic entrepreneurship: the construct and its dimensions. J Manag 29:963–989 Jansen JJP, Van Den Bosch FAJ, Volberda HW (2005) Managing potential and realized absorptive capacity: how do organizational antecedents matter? Acad Manag J 48:999–1015 Jansen JJP, Van Den Bosch FAJ, Volberda HW (2006) Exploratory innovation, exploitative innovation, and performance: effects of organizational antecedents and environmental moderators. Manage Sci 52:1661–1674 Jarvenpaa SL, Majchrzak A (2008) Knowledge collaboration among professionals protecting national security: role of transactive memories in ego-centered knowledge networks. Organ Sci 19:260–276 Jelinek M, Schoonhoven CB. (1990) Managing innovation in high technology firms: challenges to organization theory. In Gomez-Mejia LR, Lawless MW (Eds.), Organizational Issues in High Technology Management. Monographs in Organizational Behavior and Industrial Relations, vol. 11, pp. 3–17 Katila R, Ahuja G (2002) Something old, something new: a longitudinal study of search behavior and new product introduction. Acad Manag J 45:1183–1194 Ketchen DJ, Ireland RD, Snow CC (2007) Strategic entrepreneurship, collaborative innovation, and wealth creation. Strateg Entrep J 1:371–385 Khandwalla PN (1977) The design of organizations. Harcourt Brace Jovanovich, New York Khashabi P, Heinz M, Zubanov N, Kretschmer T, Friebel G (2021) Market competition and the effectiveness of performance pay. Organ Sci 32:334–351 Kieser A, Ebers M (2014) Organisationstheorien, 7th edn. Kohlhammer, Stuttgart Kohn A (1993) Why incentive plans cannot work. Harv Bus Rev 71:54–60 Kohn A (1999) Punished by rewards: the trouble with golden stars, incentive plans, A’s, praise, and other bribes. Houghton Mifflin, New York Kreps DM (1997) Intrinsic motivation and extrinsic incentives. Am Econ Rev 87:359–364 Laureiro-Martínez D, Brusoni S, Canessa N, Zollo M (2015) Understanding the exploration-exploitation dilemma: an fMRI study of attention control and decision-making performance. Strateg Manag J 36:319–338 Lavie D, Rosenkopf L (2006) Balancing exploration and exploitation in alliance formation. Acad Manag J 49:797–818 Lavie D, Stettner U, Tushman ML (2010) Exploration and exploitation within and across organizations. Acad Manag Ann 4:109–155 Lazear EP (2000a) The power of incentives. Am Econ Rev 90:410–414 Lazear EP (2000b) Performance pay and productivity. Am Econ Rev 90:1346–1361 Lazear EP (2005) Output-based pay: incentives, retention, or sorting? Res Labor Econ 23:1–25 Lee H, Choi B (2003) Knowledge management enablers, processes, and organizational performance: an integrative view and empirical examination. J Manag Inf Syst 20:179–228 Lee S, Meyer-Doyle P (2017) How performance incentives shape individual exploration and exploitation: evidence from micro-data. Organ Sci 28:19–38 Levinthal DA, March JG (1993) The myopia of learning. Strateg Manag J 14:95–112 Lewin AY, Long CP, Carroll TN (1999) The coevolution of new organizational forms. Organ Sci 10:535–550 Lin Z, Yang H, Demirkan I (2007) The performance consequences of ambidexterity in strategic alliance formations: empirical investigation and computational theorizing. Manage Sci 53:1645–1658 Lin H-E, McDonough EF, Lin S-J, Lin CY-Y (2013) Managing the exploitation/exploration paradox: the role of a learning capability and innovation ambidexterity. J Prod Innov Manag 30:262–278 Lubatkin MH, Simsek Z, Ling Y, Veiga JF (2006) Ambidexterity and performance in small-to medium-sized firms: the pivotal role of top management team behavioral integration. J Manag 32:646–672 Mahr, F., Kretschmer, T., 2010. Complementarities between IT and Organizational Structure: The Role of Corporate Exploration and Exploitation. Münchener Wirtschaftswissenschaftliche Beiträge (BWL). March JG (1991) Exploration and exploitation in organizational learning. Organ Sci 2:71–87 March JG (2006) Rationality, foolishness, and adaptive intelligence. Strateg Manag J 27:201–214 McGrath RG (2001) Exploratory learning, innovative capacity, and managerial oversight. Acad Manag J 44:118–131 Mom TJM, Van Den Bosch FAJ, Volberda HW (2007) Investigating managers’ exploration and exploitation activities: the influence of top-down, bottom-up, and horizontal knowledge inflows. J Manage Stud 44:910–931 Mom TJM, van den Bosch FAJ, Volberda HW (2009) Understanding variation in managers’ ambidexterity: investigating direct and interaction effects of formal structural and personal coordination mechanisms. Organ Sci 20:812–828 Nelson RR, Winter SG (1982) The Schumpeterian Tradeoff Revisited. Am Econ Rev 72:114–132 Neter J, Wasserman W, Kutner M (1990) Applied linear statistical models, 2nd edn. Irwin, Boston Nickerson JA, Zenger TR (2008) Envy, comparison costs, and the economic theory of the firm. Strateg Manag J 29:1429–1449. https://doi.org/10.1002/smj.718 Nohria N, Gulati R (1996) Is slack good or bad for innovation? Acad Manag J 39:1245–1264 O’Reilly CA, Tushman ML (2011) Organizational ambidexterity in action—how managers explore and exploit. Calif Manag Rev 53:5–22 O’Reilly CA, Tushman ML (2013) Organizational ambidexterity: past, present, and future. Acad Manag Perspect 27:324–338 Obloj T, Zenger T (2022) The influence of pay transparency on (gender) inequity, inequality, and the performance-basis of pay. Nat Hum Behav 6(5):646–655 Osterloh M, Frey BS (2000) Motivation, knowledge transfer, and organizational forms. Organ Sci 11:538–550 Pavlou PA, Liang H, Xue Y (2006) Understanding and mitigating uncertainty in online environments: a principal-agent perspective. MIS Q 31:105–136 Podsakoff PM, MacKenzie SB, Lee J-Y, Podsakoff NP (2003) Common method biases in behavioral research: a critical review of the literature and recommended remedies. J Appl Psychol 88:879 Prendergast C (1999) The provision of incentives in firms. J Econ Lit 37:7–63 Puranam P, Alexy O, Reitzig M (2014) What’s “new” about new forms of organizing? Acad Manag Rev 39:162–180 Raisch S, Birkinshaw J (2008) Organizational ambidexterity: antecedents, outcomes, and moderators. J Manag 34:375–409 Raisch S, Birkinshaw J, Probst G, Tushman ML (2009) Organizational ambidexterity: balancing exploitation and exploration for sustained performance. Organ Sci 20:685–695 Recht R, Wilderom C (1998) Kaizen and culture: on the transferability of Japanese suggestion systems. Int Bus Rev 7:7–22 Rhein T (2010) Beschäftigungsdynamik im internationalen Vergleich: Ist Europa auf dem Weg zum “Turbo-Arbeitsmarkt”? IAB-Kurzbericht 2010(19):1–6 Rothaermel FT, Deeds DL (2004) Exploration and exploitation alliances in biotechnology: a system of new product development. Strateg Manag J 25:201–221 Shearer B (2004) Piece rates, fixed wages and incentives: evidence from a field experiment. Rev Econ Stud 71:513–534 Sidhu JS, Volberda HW, Commandeur HR (2004) Exploring exploration orientation and its determinants: some empirical evidence. J Manage Stud 41:913–932 Siggelkow N, Levinthal DA (2003) Temporarily divide to conquer: centralized, decentralized, and reintegrated organizational approaches to exploration and adaptation. Organ Sci 14:650–669 Siggelkow N, Rivkin JW (2005) Speed and search: designing organizations for turbulence and complexity. Organ Sci 16:101–122 Smith WK, Tushman ML (2005) Managing strategic contradictions: a top management model for managing innovation streams. Organ Sci 16:522–536 Snow CC (2007) Innovation. Strat Entrepreneurship J 1:101–102 Taylor A, Greve HR (2006) Superman or the fantastic four? Knowledge combination and experience in innovative teams. Acad Manag J 49:723–740 Tomaskovic-Devey D, Leiter J, Thompson S (1994) Organizational survey nonresponse. Adm Sci Q 39:439–457 Tushman ML, O’Reilly CA (1996) The ambidextrous organizations: managing evolutionary and revolutionary change. Calif Manage Rev 38:8–30 Van de Ven AH (1986) Central problems in the management of innovation. Manage Sci 32:590–607 Voss GB, Sirdeshmukh D, Voss ZG (2008) The effects of slack resources and environmental threat on product exploration and exploitation. Acad Manag J 51:147–164 Wadhwa A, Kotha S (2006) Knowledge creation through external venturing: evidence from the telecommunications equipment manufacturing industry. Acad Manag J 49:819–835 Winter SG (1984) Schumpeterian competition in alternative technological regimes. J Econ Behav Organ 5:287–320 Zellner A (1962) An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. J Am Stat Assoc 57:348–368 Zimmermann A, Raisch S, Birkinshaw J (2015) How is ambidexterity initiated? The emergent charter definition process. Organ Sci 26:1119–1139