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Pay-for-performance incentives and individual creativity: Experimental evidence
Creativity is economically important, but is one of many goals in a typical busi- ness environment. A crucial question facing firms is how direct financial incentives on creativity affect performance in other goals. I use an experiment where participants complete a novel task that can vary in two dimensions (creativity and cost efficiency), and face pay-for-performance incentives specific to one dimension only. Using a novel content-based measure of creativity, I find that creativity-specific incentives have positive direct effects, with no evidence of negative spillover effects on cost efficiency. I develop a framework that describes how individuals search the two-dimensional space for optimal solutions, and use it to estimate parameters related to search behaviour, allowing for unrestricted heterogeneity across individuals. The willingness to experiment is a key factor in explaining variations in creativity, whether it is measured via personality traits related to risk-taking and experimentation, or via estimated parameters from my model. Both the reduced-form and structural estimation results suggest that when there are other goals besides creativity, intermediate levels of experimentation are optimal.
Date:
5 November 2020, 13:00
Venue:
Held on Zoom
Speaker:
Eileen Tipoe (University of Oxford)
Organising department:
Department of Economics
Part of:
Department of Economics Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Melis Clark
