A Fistful of Dollars: Are Financial Rewards a Suitable Management Practice for Distributed Models of Innovation?
Article first published online: 1 SEP 2011
© 2011 European Academy of Management
European Management Review
Volume 8, Issue 3, pages 165–185, Autumn 2011
How to Cite
ALEXY, O. and LEITNER, M. (2011), A Fistful of Dollars: Are Financial Rewards a Suitable Management Practice for Distributed Models of Innovation?. European Management Review, 8: 165–185. doi: 10.1111/j.1740-4762.2011.01017.x
- Issue published online: 12 OCT 2011
- Article first published online: 1 SEP 2011
- distributed innovation;
- financial rewards;
- intrinsic motivation;
- payment norms;
- motivation crowding;
- open source software (OSS)
How can firms engaged in distributed innovation attract external volunteers and direct their efforts efficiently and effectively? Extant research proposes financial rewards as suitable management practice, maintaining that extrinsic financial rewards and intrinsic motivation have a unidimensionally positive effect on volunteers' motivation. In contrast, using the same theory underlying these studies, we argue that the effect of payment is far more complex. To do so, we introduce the concept of payment norms as a moderator of the effect of payment on motivation. Conducting a scenario experiment with open source software developers, we find that intrinsic motivation decreases for individuals with norms against payment, and that self-determination mediates this effect. Furthermore, payment has a direct positive effect on total motivation, but not for individuals with strong norms for payment. Our findings help explain conflicting earlier results on motivation crowding and contribute to the debate on how to manage external volunteers in distributed innovation settings.