Management Accounting Section Midyear Meeting

Does Feedback Matter? The Impact of Incentive Type and Feedback on Creativity

• In Event: Experiments

Abstract

Research on the effect of incentives on creativity in accounting finds that paying for quantity of output yields the same level of high-creativity output as paying for only creativity or for both creativity and quantity while leading to additional lower creativity output (Kachelmeier et al. 2008). This finding is surprising and counter to economic theory, which would suggest multi-dimensional performance measurement systems perform better. However, research thus far has not examined whether the results hold up in the context of feedback. Feedback has the potential to change the effect of performance dependent incentives on creativity because it informs individuals about the success of their prior task completion strategies. We use an experiment to investigate how feedback and incentive scheme influence creativity in a two-round setting. Our study examines the effect of feedback on output when incentives either incentivize creativity-only, quantity-only, or quantity and creativity. We find that even after feedback, quantity-only incentives outperform other forms of compensation. In addition, we find in round 2 higher most creative output and high-creativity output when incentive contracts have a quantity component (e.g., quantity-only and weighted incentives) compared to fixed and creativity-only incentives.

Authors

• Alisa Gabrielle Brink, Virginia Commonwealth University

• Bernhard E. Reichert, Virginia Commonwealth University

• Matt Matthew Sarji, Virginia Commonwealth University