Role of Financial Incentives and Social Incentives in Multi-Task Settings

Posted: 21 Apr 2007

See all articles by Alexander Brueggen

Alexander Brueggen

Maastricht University

Frank Moers

Maastricht University School of Business and Economics; European Centre for Corporate Engagement (ECCE)

Abstract

In this paper, we investigate the role of financial incentives and social incentives in multi-task settings where the agent makes an effort level choice and an effort allocation choice. We focus on a setting where these choices are not independent and an active trade-off between effort level and effort allocation exists. Social incentives play a crucial role in this trade-off. While financial incentives increase the effort level, social incentives congruent with the principal's interest mitigate the distortions in effort allocation associated with financial incentives, which improves the effectiveness of financial incentives. In a 2×2 experiment, we find that participants who receive distorting financial incentives provide significantly more total effort than participants who receive a fixed wage, but they allocate effort significantly less congruently. However, the effort allocation distortion caused by distorting financial incentives is significantly reduced by congruent social incentives. We further find that the level of effort on the unmeasured task is not significantly different between fixed wages and financial incentives, which implies that distortions in effort allocation are driven by doing more of the measured task instead of doing less of the unmeasured task. Our findings have important implications for both theory building and organizational practices.

Keywords: multi-tasking, distorting financial incentives, social incentives, effort level vs. effort allocation, ethical concerns

JEL Classification: M40, M46, G34, L20

Suggested Citation

Brueggen, Alexander and Moers, Frank, Role of Financial Incentives and Social Incentives in Multi-Task Settings. Journal of Management Accounting Research, Vol. 19, 2007, Available at SSRN: https://ssrn.com/abstract=981695

Alexander Brueggen

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

Frank Moers (Contact Author)

Maastricht University School of Business and Economics ( email )

Maastricht, Limburg

HOME PAGE: http://www.maastrichtuniversity.nl/sbe

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

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