Rewards and performance: A comparison across creative and routine tasks

Abstract

Many jobs in knowledge-based economies involve non-routine tasks that require creativity. This raises the question of how to incentivize creative performance. There is a large literature that documents positive effects of rewards on simple tasks. However, a different strand of the literature suggests that rewards may be detrimental for tasks that are intrinsically motivating like creative tasks. This paper reports the results from a real-effort lab experiment with 750 subjects that studies the impact of two different types of financial incentives (noncontingent gift or tournament prize) on creative as well as purely effort-based performance. This allows us to study the effectiveness of financial rewards on creative performance and to investigate whether the effectiveness depends on the performance contingency of the reward and on the nature of the task. Our results show that routine as well as creative task performance significantly increase under the tournament scheme and, hence, that performance-contingent rewards trigger creativity effectively. In contrast, a noncontingent gift triggers reciprocity of subjects only in the simple task while creative performance is not affected. This suggests that the effectiveness of gifts depends on the nature of the task. We discuss implications for economic theory as well as for workplace management.