Pay for performance and employee creativity

Abstract

Purpose– Previous studies concerning on the effect of reward on individual creativity have generated generally inconsistent conclusions. These ambiguities call for more studies to explore the potential boundary conditions under which reward may or may not promote creativity. The purpose of this paper is to clarify how pay for performance (PFP), a specific type of extrinsic reward awarded in field settings, impacts employees’ creative self-efficacy, and their creativity under varying levels of procedural justice as well as willingness to take risks.Design/methodology/approach– This study used a survey method to investigate nine enterprises in China. A total of 236 matched subordinate-supervisor questionnaires were returned (a 94.4 percent response rate). Because of missing data, the final usable sample comprised 213 subordinate-supervisor matched questionnaires.Findings– The results suggest that for employees with low procedural justice perception or low willingness to take risks, PFP was negatively related to creative self-efficacy and creativity; where procedural justice or willingness to take risks was high, those relationships were positive. In addition, moderated path analysis revealed that when procedural justice or willingness to take risks was high, PFP had a positive indirect effect on creativity via creative self-efficacy, whereas when procedural justice or willingness to take risks was low, the indirect effects of PFP on creativity via creative self-efficacy were negative.Research limitations/implications– The findings shed light on the process through which and the conditions under which PFP may promote creativity.Practical implications– The findings have concrete implications for how to leverage PFP to enhance employee creativity through creative self-efficacy.Originality/value– The results further underscore the need to rethink the simple reward-promotes (or hinders)-creativity model in order to think in more complex ways about how and under what conditions PFP might promote or inhibit creativity. Second, the results of this research better explain how PFP promotes or inhibits creative performance by pointing to the important mediating role of creative self-efficacy. Finally, the results indicated that social cognitive theory can be used as an overarching theory to clarify how and why reward can influence creativity. Thus, the research contributes to the current literature by developing a new theoretical perspective for exploring the relation of reward to creativity.