Incentive Redesign and Collaboration in Organizations: Evidence from a Natural Experiment

Lee, Sunkee and Puranam, Phanish. 2017. Incentive Redesign and Collaboration in Organizations: Evidence from a natural experiment. Strategic Management Journal, 38(12), 2333–2352.

20 Pages Posted: 19 Nov 2015 Last revised: 7 Nov 2018

Date Written: August 8, 2017

Abstract

Separating the individual from the social effects of incentives has been challenging because of the possibility of synergies in team production. We observe a unique natural experiment in a South Korean e-commerce company in which a switch from pay-for-performance to fixed (but different) salaries took place in a staggered and effectively random manner across employees. In this case, social and individual effects perspectives make opposing predictions, enabling a critical test. We find evidence consistent with social effects of incentives, particularly as predicted by goal framing theory. The results have implications for the design of incentives to foster collaboration, organizational learning, and organizational performance.

Keywords: Incentives, Organization Design, Collaboration, Goal Framing Theory, Natural Experiment

Suggested Citation

Lee, Sunkee and Puranam, Phanish, Incentive Redesign and Collaboration in Organizations: Evidence from a Natural Experiment (August 8, 2017). Lee, Sunkee and Puranam, Phanish. 2017. Incentive Redesign and Collaboration in Organizations: Evidence from a natural experiment. Strategic Management Journal, 38(12), 2333–2352.. Available at SSRN: https://ssrn.com/abstract=2692511 or http://dx.doi.org/10.2139/ssrn.2692511

Sunkee Lee

Carnegie Mellon University ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Phanish Puranam (Contact Author)

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/ppuranam/

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