When Less is More: The Effect of Decision Rights and Performance-Dependent Incentives on Creativity

Abstract

We examine in an experiment how the allocation of decision rights over selecting most creative output and the form of incentive scheme interact to influence creative performance. The literature commonly assumes more autonomy leads to higher creativity. We propose that this is not necessarily the case. Specifically, we draw on literature on decision rights, creativity, and satisficing. We propose that giving employees decision rights over selecting the most creative output leads to less creativity due to employees satisficing and settling for less creative output. This is due to the uncertain nature of creativity, which makes it difficult to assess one’s creative output. We find for performance dependent incentives (creativity-dependent incentive scheme), the quantity and creative quality of output is lower when employees have decision rights over selecting the most creative output versus the absence of such decision rights. We do not observe such an effect for fixed compensation. Supplemental analysis show that our findings are consistent with a process, whereby employees with decision rights consistently check, evaluate, and settle for a lower performance level while producing output, but only as long as employees have an incentive to exert effort as it is the case in the performance dependent compensation condition.