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Rewarding the individual or the collective?

Researching the Relation Between Monetary Reward and Employee Innovativeness

Author Details

Author 1: De Spiegelaere, Stan

KU Leuven - HIVA

Leuven, Belgium

Author 2: Van Gyes, Guy

KU Leuven - HIVA

Leuven, Belgium

Author 3: Van Hootegem, Geert

KU Leuven - CESO

Leuven, Belgium

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Introduction

Both policy makers, managers and academia are increasingly aware of the importance of

employee creativity and innovativeness (European Commission, 2010; EUWIN, 2012). As

organizations are under pressure to continuously reinvent their products and production

processes, the employee contribution in this process of continuous innovation is

progressively acknowledged. Academic research frequently stressed that in order to boost

the creative performance of employees, one should focus on boosting their intrinsic

motivation (motivation coming from the task itself, because the employee enjoys doing it).

As such, Hammond et al. (2011) recently identified job characteristics as the main trigger of

employee innovativeness in their meta-analysis. Notwithstanding the relative consensus in

academia about the primary importance of intrinsic motivation for employee creativity and

innovativeness, HR managers on the field still quickly turn to extrinsic, monetary reward

policies in order to promote certain employee behaviour. The role of these monetary

rewards is nevertheless heavily disputed. Monetary rewards would increase the extrinsic

motivation of employees (motivation rooted in the desire to obtain some outcomes of the

work, such as reward or status (Amabile, 1993)), which could actually result in lower levels of

intrinsic motivation (Amabile, Conti, Coon, Lazenby, & Herron, 1996; Amabile, Hennessey, &

Grossman, 1986; Deci & Ryan, 2000; Kruglanski, Friedman, & Zeevi, 1971). Others

nevertheless found opposing evidence which suggest that giving extrinsic rewards could

actually increase the creative performance of employees (Eisenberger & Rhoades, 2001;

Eisenberger & Shanock, 2003; Eisenberger et al., 1990).

Some years ago, Baer, Oldham and Cummings (2003) studied these contradicting findings

and discovered that the relation of extrinsic rewards on creativity is not linear, it depends on

other characteristics which are related to the intrinsic motivation of employees. As such they

found that for employees in complex, challenging jobs extrinsic rewards have a negative

relation with their creative performance. Yet, for employees in non-challenging simple jobs,

extrinsic rewards stand in an opposite, positive relation to employee creativity.

Since then, the research literature on employee creativity and innovativeness progressed

rapidly. As such, the concept of ‘innovative work behaviour’ (IWB) and its dimensions related

to idea generation and implementation has become more popular. Also the term employee

creativity has been further investigated and researchers now frequently distinguish between

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incremental creativity at the one hand, and radical creativity at the other (Gilson & Madjar,

2011; Madjar, Greenberg, & Chen, 2011). According to many researchers, future research

should distinguish between these various dimensions and look for differential antecedents.

In this article, we study the relation between extrinsic monetary rewards, employee

creativity and innovativeness taking into account these new insights. In doing so, we

distinguish between two large categories of extrinsic reward policies frequently used by

organizations: individual performance related pay (PRP) and collective performance related

pay. As will be shown in this article, these two kinds of extrinsic reward policies have very

different relations with employee innovative outcomes. As such, this article makes a bridge

between the literature streams of industrial psychology and organizational sociology by

combining concepts and research traditions of both fields.

In what follows, we first define and describe the concepts of innovative work behaviour

(IWB), employee creativity and their dimensions. We continue with a discussion of the

difference between individual and collective forms of PRP and their relation with employee

outcomes. Afterwards, we discuss the methodology and results of the analyses.

Literature

Employee Innovative Behaviour & creativity

In this study, the main dependent variables are Innovative Work Behaviour (IWB) on the one

hand and incremental & radical creativity on the other. Innovative work behavior is here

defined as: “all employee behavior directed at the generation, introduction and/or application

(within a role, group or organization) of ideas, processes, products or procedures, new to the

relevant unit of adoption that supposedly significant benefit the relevant unit of adoption”.

IWB thus includes behavior of employees that directly and indirectly stimulates the

development and introduction of innovations on the workplace. Employee creativity can be

defined as the production of novel and useful ideas or solution in the workplace (Amabile,

1988; Oldham & Cummings, 1996; Zhou & George, 2001). The definition of IWB and

creativity are very similar, yet cover distinct realities for two main reasons. First, creativity

focuses exclusively on the generation of ideas, while IWB encompasses all employee

behaviour related to different phases of the innovation process (Kanter, 1988). Second,

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creativity traditionally refers to the creation of something absolutely new. IWB on the

contrary focuses on something new, for the relevant unit of adoption. Employees who take

the initiative to copy successful work habits from other departments, for example, are

clearly staging important ‘innovative behavior’, while not at all engaging in workplace

creativity.

As already stated, IWB makes an explicit reference to the distinct parts of the innovation

process. A problem is recognized, a idea for a solution is generated and developed, the idea

is proposed, defended and eventually implemented in the organization (Kanter, 1988).

Knowing that a normal innovation process is iterative, time consuming and complex (Kanter,

1988; Scott & Bruce, 1994; Tuominen & Toivonen, 2011), researchers distinguish between

particular employee behaviour related to the different phases of the innovation process. As

such, some authors refer to two dimensions: idea generation and idea implementation (De

Jong & Den Hartog, 2007; Yuan & Woodman, 2010), while other suggest three dimensions:

idea generation, idea championing and idea implementation (Carmeli, Meitar, & Weisberg,

2006; Janssen, 2000; Messmann & Mulder, 2011; Reuvers, van Engen, Vinkenburg, & Wilson-

Evered, 2008; Scott & Bruce, 1994). Some others refer to four (e.g. de Jong & Den Hartog,

2010) or even five dimensions (e.g. Kleysen & Street, 2001). Nevertheless, only rarely these

dimensions can actually be distinguished in the empirical data and separate analyses are

performed for the separate dimensions.

Where IWB can be subdivided between different dimensions, also the concept of creativity

can be broken up in two creativity concepts which distinguish between very different types

of creativity: incremental and radical creativity. As Zhou & George (2003) state: “Implicit in

the definition of creativity is the fact that there are different degrees of creativity. Creativity

can range from a minor change in a work procedure to a major breakthrough in science and

technology”. They here differentiate between what can be called ‘incremental’ versus

‘radical’ creativity. Other researchers (e.g. Gilson & Madjar, 2011; Madjar, Greenberg, &

Chen, 2011) built on this idea when they searched for different triggers of incremental and

radical creativity. The distinction between radical and incremental creativity is informative

when it comes to the content of the creative ideas generated by the employees. At the same

time, the concept of IWB reveals crucial information on what parts of the innovation process

the employee invests in. Both when it comes to creativity, and when it comes to IWB,

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research showed that predictors differently affect the identified subdimensions of the two

concepts.

Monetary rewards & employee creativity/innovativeness

The relation between giving employees financial incentives and employee outcomes in terms

of motivation, productivity or creativity has been the subject of fierce debates, both in

industrial psychology and organizational sociology literature. In industrial psychology, the

discussions are focused on the roles of intrinsic motivation at the one hand, and extrinsic

motivation at the other hand. Intrinsic motivation refers to a motivation to work, rooted in

the work itself. Employees can be motivated because they find the work interesting and

challenging. Intrinsically motivated employees would be more creative as they are generally

more be more curious, flexible, persistent and have an internal drive for optimizing the work

process (Baer e.a., 2003; Shalley & Gilson, 2004). Extrinsic motivation refers to a motivation

rooted in the desire to obtain some outcomes of the work, such as reward or status

(Amabile, 1993). Installing performance related incentive systems would increase the

attention of the employees to the rewards and thus increase their extrinsic motivation.

Whether this increase in extrinsic motivation occurs at the detriment of the intrinsic

motivation or is added up is one of the focal points of debates between the friends and foes

of providing incentive rewards. Empirical findings tend to find evidence for both the

argument that extrinsic rewards stimulate (Eisenberger & Rhoades, 2001; Jenkins, Gupta,

Mitra, & Shaw, 1998; Ramamoorthy, Flood, Slattery, & Sardessai, 2005) or deter

creativity/innovativeness (e.g. Kruglanski et al., 1971). Building on these contradictory

findings Baer et al. (2003) studied the effect of extrinsic reward on employee creativity,

taking into account the role of first job complexity and second the cognitive style of the

employees. His data suggested that reward has very different (and opposing) relations with

creativity, depending whether the employee has a simple or complex task. They related their

findings to the previously mentioned idea that when intrinsic motivation is high (complex

job), extrinsic rewards will ‘outcrowd’ the intrinsic motivation and reduce the creative

performance of employees. Yet, when intrinsic motivation is low (simple jobs), extrinsic

rewards will give a certain degree of control to the employees which will lead to higher

levels of creative performance.

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The same inconclusiveness is reflected in the organizational sociology field. Here, reward

systems are discussed in the context of what is called ‘High-Performance Work Systems

(HPWS)’, which are HR practices that would lead to supreme company performance through

the stimulation of the employee motivation, productivity and innovativeness. Nevertheless,

when it comes to performance related reward systems, the overall evaluation is mixed.

Empirical studies focusing on the direct effect of incentive schemes on organizational

innovativeness mostly find insignificant effects (Michie & Sheehan, 1999; Shipton, Fay, West,

Patterson, & Birdi, 2005; Shipton et al., 2004; Zoghi, Mohr, & Meyer, 2010), while some find

positive (Nielsen & Lundvall, 2003) or mixed effects (Walsworth & Verma, 2007). Just as in

the industrial psychology literature, important interaction effects are nevertheless

mentioned. As such, the effect of a performance related reward system generally increases

when combined into ‘bundles’ or ‘systems’ with other HR practices (Laursen & Foss, 2003).

Individual and collective PRP

Under the general term of ‘Performance-related pay’ (PRP), organizations introduced a wide

variety of systems in which employees receive a monetary reward contingent on the

performance of an individual, group or company as a whole (Aumayr, Welz, & Demetriades,

2011). Building on organizational research, we know that the selection of the indicators, the

process of evaluation, the frequency and the height of the reward all have their influence of

the effectiveness and success of the reward system (Thierry, 2011). A major distinction can

be made between individual and collective PRP. The first refers to PRP systems where the

reward is contingent on the individual performance of the employee, whereas collective PRP

is linked to meeting collective performance indicators on the level of the department or

company. When it comes to employee outcomes, both have very different rationales and

consequences as the focus is or on the individual, or on the group. Individual PRP (implicitly

or explicitly) introduces a form of competition between workers while collective PRP

(implicitly or explicitly) introduces an incentive for cooperation while at the same time risks

to stimulate ‘free rider behaviour’.

Individual PRP & Employee creativity/innovativeness

Building on the previously discussed theoretical and empirical literature, we suspect to find

no significant linear relations between individual PRP and employee

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innovativeness/creativity. As was demonstrated by Baer et al. (2003) the effect of reward on

creativity is dependent on the job context of the employee. As such, we suspect to find a

significant interaction effects between job resources, individual PRP and employee

creativity/innovativeness. Job resources is defined here as “those physical, social, or

organizational aspects of the job that may do any of the following: (a) be functional in

achieving work goals; (b) reduce job demands and the associated physiological and

psychological costs; (c) stimulate personal growth and development” (Bakker & Demerouti,

2007) and is closely related to how Baer et al. (2003) see their ‘job complexity’. As they

stated, providing extrinsic rewards in complex jobs tend to negatively affect individual

creativity (through depressed levels of intrinsic motivation). At the same time, providing

extrinsic rewards in simple jobs is related to higher levels of individual creativity (as

employees are given a basic sense of control in jobs with which are not intrinsically

motivating).

Hypothesis 1: There is no direct linear relation between individual PRP and employee

creativity/innovativeness.

Hypothesis 2: The relation between individual PRP and employee

creativity/innovativeness will be interacted by the degree of job resources enjoyed by

the employee in such that individual PRP will be positively related to employee

creativity/innovativeness when job resources are low and negatively when job

resources are high.

We nevertheless suspect that this relation will be weaker for idea implementation as idea

implementation is likely to suffer more from the competition element related to individual

PRP. We also suspect that the relation will be stronger for incremental rather than radical

creativity. Here we build on the work of Gilson and Madjar (2011) who stated that radical

creativity is predominantly related to intrinsic motivation, while incremental creativity is

more likely to be affected by extrinsic rewards.

Hypothesis 3: This interaction effect between individual PRP and job resources will be

particularly strong for idea implementation and radical creativity.

Collective PRP & Employee creativity/innovativeness

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Very little is known about the impact of collective PRP on the motivation or creativeness of

employees. Advocates of collective reward systems refer to the increased cooperation and

feelings of ownership or commitment of employees to state that collective reward systems

can positively contribute to the motivation and performance of employees (Bartol &

Srivastava, 2002). Adversaries on the other hand point to the problem of ‘free rider

behaviour’ of employees (Gerhart, Minkoff, & Olsen, 1995). Empirical studies are rare, yet

one study performed by Hanlon, Meyer and Taylor (1994) studied the effect of the

elimination of a gainsharing plan. After the elimination of this collective reward policy, the

researchers observed higher levels of job satisfaction, commitment, but also of idea

generation. Other studies on the other hand note that through forms of collective PRP,

employees have an incentive to share ideas and knowledge that they would otherwise keep

for themselves (Bartol & Srivastava, 2002). Also the empirical studies on the organizational

level find weak positive relations between collective forms of PRP and innovation (Aerts &

Kraft, 2008; Zoghi, Mohr, & Meyer, 2010), while others find insignificant results (e.g. Michie

& Sheehan, 1999). Further, Lorenz & Valeyre (2005) observed that the innovation prone

‘learning organization’ uses less individual pay-for-performance schemes and relatively more

collective incentive systems as compared to the ‘lean organisation’. At last, studies on the

year-old ‘Scanlon Plan’ are revealing (Welbourne & Mejia, 1995). According to these case-

studies, the introduction of a form of collective reward, combined with a organizational

structure in which employees can effectively influence the companies’ performance will

result in an overall increase of employee motivation and firm profitability, through the

optimal mobilization of the innovative and creative ideas of employees (Massoud, Daily, &

Bishop, 2008; Thierry, 2011; Wren, 2009). Building on these last insights, we suspect that the

relation between collective PRP and the individual innovative behaviour of employees will

depend on their evaluation of the influence they have on the group outcomes. If employees

feel they can effectively communicate their ideas and complaints to the group, the collective

PRP will strongly affect the employees’ innovative performance. We further suspect that the

influence of the collective PRP will predominantly affect the idea implementation behaviour

as this type of IWB is more strongly linked to group dynamics than the idea generation.

Hypothesis 4: There will be a positive relation between collective PRP and IWB or

employee creativity. This relation will be stronger for idea implementation.

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Hypothesis 5: Effective group communication will interact in the relation between

collective PRP and IWB or creativity where the combination of both collective PRP and

company resources will result in the highest levels of IWB or creativity.

Method

Choice of sample & variables: combing the best of two worlds

Both the industrial psychology approach and the organizational sociology approach have

their conceptual and methodological qualities and flaws. When it comes to industrial

psychology, we can refer to the mostly high-quality development and measurement of the

outcome variable (creativity or innovativeness). Yet, the dependent variable, reward, is

frequently measured as a subjective appraisal not of reward in general, but of ‘reward for

creativity’ (Baer e.a., 2003; George & Zhou, 2002) or ‘reward for performance’ (Deckop,

Mangel, & Cirka, 1999). While this approach has its advantages in terms of clarity, the

disadvantage is that it’s difficult to make an overall assessment of the success of a PRP

scheme as the perception of getting a reward for the employees’ creativity might differ from

employee to employee. Further, these studies are frequently based on relatively small

samples (n < 200) from very few organizations. The insights of organizational sociology also

face some limitations. First, the outcome variable in these studies is frequently a dummy

variable distinguishing between companies that are ‘innovators’ and those that are not. The

samples tend to vary in size (from 111 companies to over 3000), yet the organizational level

design of the studies make it hard to make conclusions on the impact of PRP on individual

Innovative Work Behaviour: Idea Generation Idea ImplementationEmployee Creativity: Incremental Creativity- Radical Creativity

Individual PRP

Collective PRP

Job resources

Group communication

Hyp 4Hyp 5

Hyp 1

Hyp 2 & 3

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behavior employees. Whether introducing PRP schemes is related to a higher innovative

activity of employees in companies, or whether innovative companies tend to introduce PRP

systems is unresolved by these studies.

This study tries to overcome some of these research limitations, first by building on the

conceptual work of the industrial psychologist and taking over their concepts. Therefore, a

employee level study was designed which used a far larger sample than most studies in

industrial psychology. For the independent variable, the study chose not to rely on

subjective measures like ‘reward for creativity’, but to focus on the presence or absence of

various types PRP systems. Therefore, the survey was designed in such a way that it covered

employees from a wide range of companies.

Data collection and sample

The data used in this article is based on an employee-level face-to-face data collection based

on standardized surveys. The sample consisted of Flemish unionized workers from five

different industries: banking, retail, hotels & restaurants, chemical industry and the social

sector. It concerns an a-select sample taken from the membership databases of the two

primary unions organized in these sectors. As such, the sample consisted of employees from

a multitude of organizations and HR policies. In total 927 surveys were collected with an

overall response rate of 49%.

Measures

The presence of individual and collective forms of performance-related pay was measured

using dummy variables. Employees were asked whether a part of their wage was dependent

on their individual performance first. Second, employees were asked whether their wage (on

a monthly, yearly or other basis) was dependent on the group level performance or

company performance (profit sharing, gain sharing and occasional collective bonuses).

Innovative work behaviour, was measured using the IWB scale developed by De Jong & Den

Hartog (2010). Respondents indicated how much a certain characteristic occurred in their

job, ranging from “very rarely” to “very frequent”. Examples are: finding original solutions

for work related problems and developing innovative ideas into practical application. An

exploratory factor analysis showed that a two-factor solution was to be preferred. This

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factor solution separated the IWB scale in a idea generation and idea implementation

dimensions with high reliability (Cronbach α: 0.88 & 0.94).

Radical and incremental creativity were measured using 10 items developed by Madjar et al.

(2011). Respondents could indicate whether they agreed with a certain statement using a 7

point likert scale. Sample statements are ‘I use previously existing ideas or work in an

appropriate new way’ and ‘I suggest radically new ways of working or products’. The five

item radical creativity scale had a high reliability (α: 0.81) while the incremental creativity

scale had a lower, yet acceptable reliability (α: 0.68).

Job resources was measured using a series of 7 questions which referred to job autonomy

(e.g. I can arrange my own work pace’ and ‘I can decide for myself how I perform my work’)

and 7 questions related to learning opportunities at work (e.g. I have the opportunity to

develop my professional skill and through my work, I learn new stuff). Following Schaufeli &

Bakker (2004), we calculated a single variable of all these items with a high reliability

(Cronbach α: 0.87).

The measure for group communication was based on a 3 item scale including questions like

‘in my company people can express clearly when they disagree on a topic’, and ‘in my

company, one can react on decisions coming from above’ (α: 0.84). Further, control variables

were included such as educational level, sector of employment, age, size of company and

type of employee.

Common method variance

The data used in this research was all gathered from one single source, the employee. This

could lead to serious problems related to ‘Common Method Variance’ (CMV): variance

stemming from the use of a single source of information, not from the actual empirical

differences or correlations. CMV could inflate correlations and thus lead to incorrect or

overblown results. Although several statistical method were developed in order to assess the

impact of CMV (e.g. Harman’s single factor test), proactive strategies for avoiding CMV are

still preferred (Conway & Lance, 2010). As the design of the study (employee level, multiple

organizations) made a multi-source data gathered practically infeasible, the survey tried to

reduce the impact of CMV by providing a break of methods when it comes to one of the

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central dependent variables (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003): incremental

and radical creativity. Where all other questions were read by the interviewer and the

answers were noted, the respondents were asked to complete the answers regarding

employee creativity on their own, as they would do with a paper-and-pencil survey. After

this intermezzo, the interviewer continued with the normal procedure of a face-to-face

interview. Next, building on the proposal of Podsakoff et al. (2003) the answer scales used in

the research differed in size (6-7 point scales) and in labels (agree-disagree vs. always-never).

Further, a Harman’s single factor test was performed on scale variables included in this

research. This confirmatory factor analysis resulted in the identification of 7 different factors

which makes the likelihood of disruptive CMV improbable. At last, there are other good

arguments to suspect that CMV is not a central problem in this research. First, more ‘factual’

questions on the presence or absence of certain HR methods is significantly less affected by

CMV (Chang, Van Witteloostuijn, & Eden, 2010). Second, finding significant interaction

effects indicates that problematic CMV is improbably as they are generally deflated by a

large method effect (Siemsen, Roth, & Oliveira, 2010).

Results

Descriptive results

Table 1 and 2 give some descriptive statistics of the data. We first see that the overall

reliability of the scales used in this research was satisfactory. The scales were calculated

based on the factor scores of the items. Consequently, all variables were centered around a

mean of zero. As we expected, the correlations of the job resources and group

communication variable with the employee creativity and innovativeness variables are all

positive and significant.

Table 1: Descriptive Statistics - Correlations

Cr a St Dev 1 2 3 4 5

1 Job Resources 0,87 0,94

2 Group Communication 0,84 0,93 0,327*

3 Idea Generation 0,88 0,95 0,507* 0,190*

4 Idea Implementation 0,94 0,97 0,445* 0,221* 0,767*

5 Incremental Creativity 0,68 0,86 0,241* 0,161* 0,364* 0,270*

6 Radical Creativity 0,81 0,93 0,239* 0,077* 0,467* 0,522* 0,491*

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* p: <,01

Table 2 gives an overview of the relation between the various variables and the PRP policies.

As can be seen, a sufficient fraction of the sample was subjected to individual or collective

PRP policies. The regarding some dependent and independent variables are mostly relatively

small and statistically not significant. Regarding individual PRP we see a significant difference

when it comes to group communication (which has a higher value when there is an

individual PRP system) and the two dimensions of IWB. Regarding collective PRP the only

observed bivariate difference is found regarding the job resources. Employees who fall under

a collective PRP system tend to have more resources in their jobs.

Table 2: Descriptive statistics - Individual & Collective PRP

n ResourcesGroup

CommunicationIdea

GenerationIdea

ImplementationIncremental

CreativityRadical

Creativity M SD M SD M SD M SD M SD M SD

Individual PRPYes 340 0,04 0,84 0,10 0,82 0,17 0,85 0,11 0,91 0,01 0,78 0,03 0,89No 587 -0,03 0,99 -0,06 0,99 -0,10 0,99 -0,07 1,00 0,00 0,91 -0,02 0,95

Sign diff. not sign. ** ** ** not sign. not sign.Collective PRP

Yes 177 0,16 0,77 -0,08 0,92 0,11 0,83 0,02 0,87 -0,06 0,80 -0,06 0,97No 736 -0,04 0,98 0,02 0,94 -0,03 0,98 -0,01 0,99 0,01 0,88 0,01 0,92

Sign diff. ** not sign. not sign. not sign. not sign. not sign.* α:0,05; ** α:0,01

Regression Results

The results of the regression analysis are given in Table 3. We first of all notice that our

model has a relative strong explanatory value for the two IWB dimensions (R2 between 0.28

and 0.35), yet this is not so for our creativity dimensions (R2 between 0.11 and 0.13). Next,

we see that job resources stand in a strong positive linear relation with all dependent

variables in this research. This finding is in line with the literature on the importance of job

resources of employee innovativeness (Hammond e.a., 2011). The linear relation between

group communication and our dependent variables is nevertheless more ambiguous. Where

group communication is positively related to idea implementation and (weakly) to

incremental creativity, it is not related to idea generation and even negatively related to

radical creativity. This findings confirms that idea implementation is, more than idea

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generation, an form of employee behaviour that is affected by group dynamics. The same

can be said for radical creativity, where effective group communication can withhold

employees from developing really radical ideas on how to change the work organization.

Table 3: Regression Results

Idea Generation Idea Implementation Incremental Creativity Radical CreativityModel 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2

R square 0,34 0,35 0,28 0,28 0,11 0,12 0,12 0,13Beta p val. Beta p val. Beta p val. Beta p val. Beta p val. Beta p val. Beta p val. Beta p val.

Job Resources 0,40 <,01 0,44 <,01 0,34 <,01 0,36 <,01 0,22 <,01 0,04 <,01 0,24 0,04 0,27 <,01

Group Communication 0,03 0,31 -0,01 0,67 0,09 0,01 0,05 0,15 0,06 0,04 0,04 0,39 -0,03 0,03 -0,05 0,20

Collective PRP (0: no PRP) 0,30 <,01 0,29 <,01 0,27 <,01 0,26 <,01 0,05 0,45 0,07 0,53 0,22 0,07 0,22 <,01

Individual PRP (0: no PRP) 0,03 0,68 0,08 0,31 -0,02 0,77 0,01 0,93 0,00 0,99 0,09 0,70 0,04 0,09 0,09 0,36Coll PRP* Group Resources 0,15 0,02 0,11 0,09 0,07 0,10 0,08 0,25Ind PRP*Job Resources -0,23 0,01 -0,13 0,14 0,09 0,11 -0,23 0,02Model controlled for age, education, sector, company size & hierarchical status

Turning to our hypotheses, we see that our first hypothesis is fully confirmed. There’s no

linear relation between the presence of an individual PRP system and the individual

employee behaviour. Nevertheless, the interaction (hypothesis two) of individual PRP with

job resources on the dependent variables was significant for both idea generation and

radical creativity. For ease of interpretation, we plotted these interaction effects in figure 1

and 2.

Figure 1: Interaction of Individual PRP and job resources on idea generation

No ind. PRP Ind PRP-0.5

-0.25

0

0.25

0.5

Low Re-sources

Idea

Gen

erat

ion

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Figure 2: Interaction of Individual PRP and job resources on radical creativity

No ind. PRP Ind PRP-0.5

-0.25

0

0.25

0.5

Low Re-sources

Rad

ical

Cre

ativ

ity

As we hypothesized (hypothesis two), the relation of individual PRP shifts, depending on the

level of job resources. When employees have ‘high resource jobs’, the individual PRP is not,

or even negatively related with the generation of ideas and radical creativity. For employees

in low resources jobs, on the other hand, the relation between individual PRP and radical

creativity or idea generation is positive. Regarding the relation of individual PRP on idea

implementation or incremental creativity, none of the studied relations (direct and

interaction) were significant. As not all the interaction effects were significant, we conclude

that our second hypothesis is only partially confirmed. The third hypothesis on the other

hand is fully confirmed. Individual PRP and the interaction with job resources is particularly

important for idea generation and radical creativity.

Regarding collective forms of PRP, we suggested that there would be a positive relation

between collective PRP and the employee outcomes, and that this relation will be

particularly strong for idea implementation. As can be seen in Table 3, collective PRP indeed

stands in a direct positive relation with idea generation, idea implementation and radical

creativity. Incremental creativity on the other hand, is not significantly related to collective

PRP. The strength of the relation with idea implementation is not significantly different from

the relation with idea generation which refutes the second part of our fourth hypothesis.

Our fifth hypothesis suggested that the relation between collective PRP and our dependent

variables will be particularly outspoken when the subjective appraisal of group

communication in the company is high. This hypothesis could only be confirmed for idea

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generation (figure 3) and shows the pattern we hypothesized. For all other dependent

variables, this interaction effect was insignificant.

Figure 3: Interaction of collective PRP and group level resources on idea generation

No Coll PRP Coll PRP-0.5

-0.25

0

0.25

0.5

Low Group communica-tion

Idea

Gen

erat

ion

Discussion

As managers try to influence the behaviour of their employees, they frequently turn to

monetary incentive schemes to do so. Yet, monetary rewards schemes are mostly known for

their complexity, not their effectiveness. Moreover, giving people financial rewards can well

undermine their intrinsic motivation and negatively affect their innovative and creative

performance. Earlier studies showed that the relation between rewards and creativity is

complex (Baer e.a., 2003) and this study builds on these insights to further untangle this

relevant research question. In doing so, we use recent insights on the diverse nature of both

employee innovative behaviour and employee creativity. Further, we chose not to use

subjective evaluations of reward, but objective indicators regarding the absence or presence

of both individual and collective PRP systems.

Our analysis first showed what is generally known fact in the innovation research: more than

rewards, the work content is a crucial factor for explaining employee innovativeness. Job

resources such as autonomy and learning opportunities are strongly related to all

dimensions of IWB and employee creativity.

P a g e | 17

Next, the effect of group communication less straightforward. Effective group

communication is positively related to idea implementation and incremental creativity, yet

negatively to radical creativity. Although the relation is relatively weak, this result

nevertheless came as a surprise. Yet, knowing that innovative behavior sometimes leads to

negative reactions of colleagues and supervisors (Janssen, Van de Vliert, & West, 2004;

Janssen, 2003), we can suspect that this will be increasingly so for very radical ideas.

Regarding our main object of study, individual and collective PRP, the findings mostly

confirmed our hypothesis. Individual PRP is mostly unrelated to employee innovative or

creative behaviour. Both for idea implementation and incremental creativity, no relation was

between the two variables. For idea generation and radical creativity on the other hand, the

interaction between job resources and individual PRP was significant. Analysis of the pattern

showed that, in line with previous findings (e.g. Baer et al., 2003), individual PRP is positively

related with the dependent variables when the job resources are low, yet negatively when

job resources are high. Although our data cannot establish causal relation, it appears that

giving individual rewards to employees is no managerial ‘quick win’ for employee

innovativeness. On the contrary, blind individual reward policies can potentially undermine

the innovative performance of employees and therefore the performance of the company at

large.

Contrary to the complexity of individual PRP, collective PRP was found to be directly and

strongly related to both dimensions of IWB and radical creativity. For idea generation, we

also found a significant interaction with effective group communication on ideas and

complaints which amplified the positive relation of collective PRP. This last finding confirms

the year old case-study findings on the implementation of so-called Scanlon Plans: effective

employee innovation comes from the combination of collective reward with effective

participation of employees. The fact that incremental creativity is unrelated to collective

PRP is furthermore surprising. Just as when it comes to effective group communication,

incremental creativity seems to remain largely unaffected by the explanatory variables in the

model. Reasons for this could be the nature of incremental creativity which, just as job

crafting (Berg, Dutton, & Wrzesniewski, 2008), happens in any given situation. Alternatively,

the lack of significant relations could be explained by the fact that the measurement of

incremental creativity in this research was imperfect (cronbach alpha <0.70).

P a g e | 18

The findings on first individual PRP and collective PRP could hardly be more contrasting.

Where individual PRP asserts itself as a complex, potentially negative policy option for

stimulation employee innovativeness, the relation between collective PRP and employee

innovativeness is straightforward and simple. This observation stands in contrast with the

very scant attention that went collective reward in both the industrial psychology and

organizational sociology literature.

This article therefore contributes to the overall literature on rewards which hardly takes into

account the differential effect of different types of employee reward systems. Further, by

taking into account the dimensions of both IWB and employee creativity, we contributed to

the literature that searches for the antecedents of radical and incremental creativity and

where they diverge (e.g. Gilson & Madjar, 2011).

Conclusion

As Jeffrey Pfeffer (1998) noted in his article in the Harvard Business Review, performance

related pay policies are very popular with managers cause, “It's simpler for managers to

tinker with compensation than to change the company's culture”. Yet, while implementing

reward systems might be relatively easy, assessing their outcomes is not, definitely not when

it comes to employee innovativeness or creativity. As we have shown in this article, when it

comes to individual PRP, both negative, positive and insignificant relations are found. All

depends on first the outcome variable and second, the degree of resources enjoyed by the

employee. When the job is challenging and resourceful, individual PRP undermines

employee idea generation and their radical creativity. Yet, when resources are low,

individual PRP can actually enhance their innovative behaviour.

Where the individual PRP is marked by ambiguousness and complexity, collective PRP has a

strikingly straightforward and strong relation with employee innovative outcomes (except

when it comes to incremental creativity). As has been shown by this article, reward matters

for creativity. Yet, the size and direction of the relation all depends on the job of the

employee and on the organization.

P a g e | 19

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