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Rewarding value‐creating ideas in organizations: The power of low‐powered incentives

Year: 2013

Type: article

Abstract: Ideas from employees are a major source of value creation in firms, yet the merits of rewards for incentivizing the generation of ideas are highly contested. Using a computational model, we show that firms can improve performance by offering low-powered rewards for the selection and implementation of employee ideas. Low-powered incentives provide a sufficient stream of good ideas, but few exceptional ones. Higher-powered incentives, in contrast, do not systematically translate into exceptional ideas either, but generate an excessive number of good ideas. Performance-based rewards thus appear to be a blunt tool to harness the long tail of innovation. We develop propositions to guide empirical research and discuss their implications for strategy and organizational design.

Source: Strategic Management Journal

DOI: 10.1002/smj.2093

Authors: Oliver Baumann, Nils Stieglitz

Institutions: University of Southern Denmark, Frankfurt School of Finance & Management

Language: English

Topic: Innovation and Knowledge Management

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W2334007494

FWCI: 21.73

Cites: 79

Cited by: 92

Related to: 10