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- W2138506607 abstract "Previous research in economics shows that compensation based on the pay-for-performance principle is effective in inducing higher levels of effort and productivity. On the other hand, research in psychology argues that performance-based financial incentives inhibit creativity and innovation. How should managerial compensation be structured if the goal is to induce managers to pursue more innovative business strategies? In a controlled laboratory setting, we provide evidence that the combination of tolerance for early failure and reward for long-term success is effective in motivating innovation. Subjects under such an incentive scheme explore more and are more likely to discover a novel business strategy than subjects under fixed-wage and standard pay-for-performance incentive schemes. We also find evidence that the threat of termination can undermine incentives for innovation, while golden parachutes can alleviate these innovation-reducing effects." @default.
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- W2138506607 date "2011-01-01" @default.
- W2138506607 modified "2023-09-30" @default.
- W2138506607 title "Is Pay-for-Performance Detrimental to Innovation?" @default.
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- W2138506607 doi "https://doi.org/10.2139/ssrn.1270384" @default.
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