Pay for Creativity? The Complementarity between Individual Rewards And Subjective Evaluations of Non-Task-Related Performance in Incentive System Design

Abstract

In this paper, I empirically investigate the impact of an organization’s reliance on collaborative creativity on the design of incentive systems. In creativity-reliant firms, i.e., firms for which the primary source of value creation lies in the creativity of their core employees, incentive system design is particularly challenging, since the nature of creative work constrains the feasibility of extrinsic incentives but at the same time creates a need for them. Accordingly, literature seems to suggest that the use of incentives renders people not creative enough, while a lack of them makes them “too creative”. I argue that a solution to this dilemma can be found in (1) acknowledging that the decision to use individual rewards is not made in isolation, and (2) viewing the incentive system as a set of complementary choices. I theoretically argue and empirically show that subjective evaluations of non-task-related performance and individual rewards are complements in creativity-reliant settings. Given the implications of this complementarity for incentive system design, I further show that reliance on collaborative creativity increases the use of individual rewards in the presence of such subjective evaluations, while it decreases its use in the their absence.

Keywords: reliance on collaborative creativity, individual performance-based rewards, subjective evaluations of non-task-related performance, complementarity theory