An Experiment of Incentive and Sorting Effects of Pay-for-Performance on Creative Performance

Abstract

There is a longstanding debate about whether pay-for-performance (PFP) enhances or undermines creative performance. Traditional motivation and revised creativity theories suggest that PFP and intrinsic task interest can be combined additively to enhance creative performance, whereas cognitive evaluation theory (CET) and self-determination theory (SDT) posit the undermining effect of PFP. To resolve these conflicting predictions and provide a more comprehensive understanding of how and when PFP influences creative performance, the current study incorporated the incentive and sorting mechanisms of PFP, varying strengths of PFP, and task autonomy as a key moderator. A novel laboratory experiment was designed to better reflect real workplace contexts, using more work-like creative tasks, benchmarking the incentive rates many U.S. companies adopt, and allowing subjects to sort into different pay conditions. Results showed that, through both incentive and sorting mechanisms, high PFP intensity more strongly enhanced creative performance than low PFP intensity and fixed pay did. This positive effect of PFP was greater when task autonomy was higher. In addition, exploratory analyses revealed that risk aversion and creative self-efficacy did not moderate the relationship between PFP and creative performance, but significantly predicted the probability of sorting into PFP.