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Rejections, Incentives, and Employee Creativity: When Chocolate is Better Than Cash

Sat, October 13, 3:30 to 5:00pm, TBA

Abstract

We use an experiment to provide evidence on how a rejection of a creative idea and reward type influence future creative performance. We find that a rejection of creative idea leads to lower perceived competence and lower performance in a subsequent similar creativity task. Next, the performance difference between rejected and accepted participants only manifests when cash rewards are subsequently used to motivate future creativity, but not when tangible rewards are used. Our results are consistent with recent work in behavioral economics suggesting that tangible (cash) rewards will activate a “non-calculative” (“calculative”) process in which experiences of success/failure are less (more) likely to be translated into future expected payoffs. Accordingly, the motivational effect of rewards will be less sensitive to changes in assessed probability of success when tangible rewards are provided compared to when cash rewards are provided. Our study extend the literature on creativity by bringing to the forefront the neglected role of rejections in firms’ long-term innovation and the asymmetric effect of reward type for rejected versus accepted employees.

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