Does Contingent Reward Leadership Enhance or Diminish Team Creativity?

Abstract

Although prior research has shown that contingent reward transactional leadership is, on average, nearly as highly related to team outcomes as is transformational leadership, few studies have examined the mechanisms whereby and the conditions under which contingent reward leadership is related to team creativity. Drawing on social exchange theory, we argue that contingent reward leadership can enhance team knowledge sharing and, in turn, team creative performance because it specifies effort-reward contingencies for knowledge sharing and because it motivates team members to reciprocate for consistence and transparent treatment their leader exhibits towards them. Moreover, we propose that this relationship is moderated by leader unpredictability, which can undermine the otherwise positive effects of contingent reward leadership. In a two-source, lagged design (three-wave) field study with data from 70 organizational teams, we found a conditional indirect (moderated mediation) effect of contingent reward leadership on team creative performance through team knowledge sharing. This conditional indirect effect was positive when leader unpredictability was low, and negative when leader unpredictability was high. Our research suggests that consistent and predictable contingent reward leadership can be an effective tool for leaders to foster creativity in teams.