The Effect of Task Interdependence and Type of Incentive Contract on Group Performance
Posted: 28 Mar 2008
We extend Fisher, Peffer, and Sprinkle (2003) to investigate the effectiveness of a budget-based incentive contract to settings with alternate task characteristics. We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to higher levels of performance than a piece-rate contract. However, we do not find higher performance when we modify the task to be interdependent, arguably a key feature of group tasks. We also show that goal commitment mediates the incentive contract-performance relation for tasks with an additive production function. Collectively, these results suggest that variations in production technology influence the relative motivational effectiveness of different incentive plans.
Keywords: incentive contract, task interdependence, group performance, goal commitment
JEL Classification: J33, M40, M46
Suggested Citation: Suggested Citation