The Impacts of Bonus and Penalty on Creativity: Insights from an Eye-Tracking Study

Abstract

This study explores the impacts of incentive contracts on the creative process and the resulting creativity of a design job. Using an eye-tracking device to track the designers’ eye movements during an artwork design task, we found that designers working under a piece-rate plus competitive bonus plan allocated more effort to the idea generating process than designers under a piece-rate minus penalty for defectives plan. We also found that the effort allocated to idea generating and the intensity of the effort devoted to design improvement are critical for producing creative designs. In contrast, the effort allocated to the design evaluating process contributes to product quantity, but cripples design output creativity. The findings of this study suggest that properly-designed incentive contracts can increase employees’ creativity by directing their efforts towards the idea-generating process in a creative task.

Keywords: creative-contingent incentives, creative process, creativity, eye-tracking

JEL Classification: M40, M46, J33