Are Constraints Good for Creativity? The Effect of Decision Rights and Performance-Dependent Incentives on Creativity
43 Pages Posted: 22 Mar 2021 Last revised: 4 Oct 2021
Date Written: March 21, 2021
The allocation of decision rights is an important and ubiquitous issue in companies since all companies require at least a rudimentary hierarchical structure and separation of duties to function. This study examines how decision rights influence creativity depending on different forms of compensation. Using an experiment, we examine how the allocation of decision rights over selecting the most creative output influences creative performance for fixed and performance dependent compensation that depends on the creativity of the selected output. The literature commonly assumes that creativity necessitates autonomy, which implies that any restrictions to that autonomy negatively affect creativity. Contrary to that position, we propose consistent with a recent stream of literature that some restrictions are beneficial for the oft unstructured and ill-defined creative process. We propose and find that not giving employees decision rights over selecting the most creative output leads to higher employee creative output compared to when employees have such decision rights for employees with performance dependent compensation, but not for fixed compensation. This effect occurs despite the selection phase for the most creative output occurring at a different stage of the task than the production task. Our results show that having decision rights over selecting the most creative output leads employees with decision rights to engage in a satisficing process and settle for lower creativity output. This satisficing process leads to differences in the amount of high-creativity output (top 25% of creativity) with high-creativity output being highest when employees do not have decision rights and receive performance dependent compensation. Our study is the first that using the rigor of an experimental economics laboratory approach examines the effect of decision rights on creativity.
Keywords: creativity; incentives; autonomy; decision rights; subjective performance evaluations; experimental economics
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