Attracting Creativity: The initial and aggregate effects of contract selection on creativity-weighted productivity

Steven J. Kachelmeier, Michael G. Williamson

Research output: Contribution to journalReview articlepeer-review

Abstract

Performance-based compensation contracts can affect productivity both by motivating effort and by attracting workers whose abilities align best with the offered contracts. Using an experiment in which participants design "rebus puzzles," this study tests whether the incremental benefits of contract self-selection extend to a multidimensional performance environment in which participants choose between a contract that rewards both quantity and creativity versus a contract that rewards quantity only. Findings indicate that participants who choose a creativity-weighted pay scheme perceive themselves to have greater creative potential than those who choose a quantityonly scheme. This perceived creativity advantage manifests itself in the superior initial creativity ratings of such participants' productive output. However, in the aggregate, participants paid only for quantity eventually surpass the creativity-weighted productivity scores of participants paid for creativity-weighted productivity, whether compensation contracts are self-selected or randomly assigned. Thus, the implications of contract selection on creativity-weighted productivity hinge on the importance of the initial advantage enjoyed by participants who self-select a creativity-weighted contract.

Original languageEnglish (US)
Pages (from-to)1669-1691
Number of pages23
JournalAccounting Review
Volume85
Issue number5
DOIs
StatePublished - Sep 2010
Externally publishedYes

Keywords

  • Adverse selection
  • Contingent compensation
  • Creativity
  • Incentives
  • Multi-dimensional performance measurement

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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