The Effect of Task Interdependence and Type of Incentive Contract on Group Performance

We extend Fisher et al. (2003) to investigate the effectiveness of a budget-based incentive contract to settings with alternate task characteristics.We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to higher levels of pe...

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Bibliographic Details
Published in:Journal of management accounting research 2008-01, Vol.20 (s1), p.1-18
Main Authors: Guymon, Ronald N., Balakrishnan, Ramji, Tubbs, Richard M.
Format: Article
Language:English
Subjects:
Effectiveness studies
Equilibrium
Expected utility
Hypotheses
Incentive plans
Motivation
Production functions
Studies
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Summary:We extend Fisher et al. (2003) to investigate the effectiveness of a budget-based incentive contract to settings with alternate task characteristics.We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to higher levels of performance than a piece-rate contract. However, we do not find higher performance when we modify the task to be interdependent, arguably a key feature of group tasks. We also show that goal commitment mediates the incentive contract-performance relation for tasks with an additive production function. Collectively, these results suggest that variations in production technology influence the relative motivational effectiveness of different incentive plans.
ISSN:1049-2127
1558-8033
DOI:10.2308/jmar.2008.20.s-1.1