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A Fistful of Dollars: Are Financial Rewards a Suitable Management Practice for Distributed Models of Innovation?

Authors

  • OLIVER ALEXY,

    Corresponding author
    1. Imperial College Business School, Imperial College London
    2. Schöller Chair in Technology and Innovation Management, Technische Universität München
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  • MARTIN LEITNER

    1. Solution Management, smartmachine Forschung & Entwicklung GmbH, Salzburg
    2. Schöller Chair in Technology and Innovation Management, Technische Universität München
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Oliver Alexy, Imperial College Business School, Imperial College London, Tanaka Building, South Kensington Campus, London SW7 2AZ, UK, Tel: +44-20-75945917, Fax: +44-20-75945915. E-mail: o.alexy@imperial.ac.uk

Abstract

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.

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