Abstract

http://ssrn.com/abstract=1301712
 
 

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Incentives and Innovation: A Multi-Tasking Approach


Thomas F. Hellmann


University of British Columbia (UBC) - Sauder School of Business

Veikko Thiele


Queen's University - Queen's School of Business

November 12, 2008

Queen's School of Business Research Paper

Abstract:     
This paper examines how employees trade off planned activities versus unplanned innovation, and how firms can choose incentives to affect these choices. It develops a multi-task model where employees makes choices between their assigned standard tasks, for which the firm has a performance measure and provides incentives, and privately observed innovation opportunities that fall outside of the performance metrics, and require ex-post bargaining. The model shows how firms adapt incentive compensations in the presence of such unplanned innovation. If innovation are highly firm-specific, firms provide lower-powered incentives for standard tasks to encourage more innovation, yet in equilibrium employees undertake too few innovation. The opposite occurs if innovation are less firm-specific. We also investigate the effectiveness of several possibilities to encourage innovation, such as tolerance for failure, investing in employee innovation, stock-based compensation, and the allocation of intellectual property rights.

Number of Pages in PDF File: 54

Keywords: Innovation, multi-tasking, incentives

JEL Classification: D82, D86, M52

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Date posted: November 16, 2008 ; Last revised: July 2, 2014

Suggested Citation

Hellmann, Thomas F. and Thiele, Veikko, Incentives and Innovation: A Multi-Tasking Approach (November 12, 2008). Queen's School of Business Research Paper. Available at SSRN: http://ssrn.com/abstract=1301712 or http://dx.doi.org/10.2139/ssrn.1301712

Contact Information

Thomas F. Hellmann
University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8476 (Phone)
604-822-8477 (Fax)
HOME PAGE: http://strategy.sauder.ubc.ca/hellmann
Veikko Thiele (Contact Author)
Queen's University - Queen's School of Business ( email )
Goodes Hall
143 Union Street
Kingston, ON K7L 3N6
Canada
+1 613 533-2783 (Phone)
+1 613-533-6589 (Fax)
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