A Fistful of Dollars: Are Financial Rewards a Suitable Management Practice for Distributed Models of Innovation?

21 Pages Posted: 14 Oct 2011

See all articles by Oliver Alexy

Oliver Alexy

Technische Universität München (TUM), TUM School of Management

Martin Leitner

Technische Universität München (TUM) - Schöller Chair in Technology and Innovation Management

Date Written: Autumn 2011

Abstract

How can firms engaged in distributed innovation attract external volunteers and direct their efforts efficiently and effectively? Extant research proposes financial rewards as suitable management practice, maintaining that extrinsic financial rewards and intrinsic motivation have a unidimensionally positive effect on volunteers' motivation. In contrast, using the same theory underlying these studies, we argue that the effect of payment is far more complex. To do so, we introduce the concept of payment norms as a moderator of the effect of payment on motivation. Conducting a scenario experiment with open source software developers, we find that intrinsic motivation decreases for individuals with norms against payment, and that self‐determination mediates this effect. Furthermore, payment has a direct positive effect on total motivation, but not for individuals with strong norms for payment. Our findings help explain conflicting earlier results on motivation crowding and contribute to the debate on how to manage external volunteers in distributed innovation settings.

Keywords: distributed innovation, financial rewards, intrinsic motivation, payment norms, motivation crowding, open source software (OSS)

Suggested Citation

Alexy, Oliver and Leitner, Martin, A Fistful of Dollars: Are Financial Rewards a Suitable Management Practice for Distributed Models of Innovation? (Autumn 2011). European Management Review, Vol. 8, Issue 3, pp. 165-185, 2011. Available at SSRN: https://ssrn.com/abstract=1943983 or http://dx.doi.org/10.1111/j.1740-4762.2011.01017.x

Oliver Alexy (Contact Author)

Technische Universität München (TUM), TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany
+49-89-289-52803 (Phone)
+49-89-289-52899 (Fax)

HOME PAGE: http://www.ent.wi.tum.de

Martin Leitner

Technische Universität München (TUM) - Schöller Chair in Technology and Innovation Management ( email )

Arcisstr. 21
München, 80333
Germany

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