Incentivizing Innovation Under Ambiguity: The Role for Intrinsic Incentives and Corporate Identity

50 Pages Posted: 1 Oct 2017

See all articles by Seong K. Byun

Seong K. Byun

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate

Date Written: August 8, 2017

Abstract

This paper examines the role of intrinsic incentives and corporate identity in motivating innovation. We show that when innovation is ambiguous, the use of extrinsic, high-powered incentives can deter innovation when it is not complemented with strong intrinsic incentives --- the degree of self-motivation, and the extent to which the agent identifies with firm's goals and mission. The paper predicts that extrinsic and intrinsic incentives are not simple substitutes, but play a complementary role in motivating innovation, which explains why many innovative companies that provide generous extrinsic incentives also invest heavily in fostering corporate culture.

Keywords: ambiguity, uncertainty, intrinsic incentives, innovation, corporate identity, corporate culture, compensation

JEL Classification: D86, G30, O32, M14

Suggested Citation

Byun, Seong K., Incentivizing Innovation Under Ambiguity: The Role for Intrinsic Incentives and Corporate Identity (August 8, 2017). Available at SSRN: https://ssrn.com/abstract=3044466

Seong K. Byun (Contact Author)

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate ( email )

Richmond, VA 23284
United States

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