The Effects of Monetary Incentives on Effort and Task Performance: Theories, Evidence, and a Framework for Research
The effects of monetary incentives on effort and task performance: theories, evidence, and a framework for research
Abstract The purpose of this paper is to review theories and evidence regarding the effects of (performance-contingent) monetary incentives on individual effort and task performance. We provide a framework for understanding these effects in numerous contexts of interest to accounting researchers and focus particularly on how salient features of accounting settings may affect the incentives-effort and effort-performance relations. Our compilation and integration of theories and evidence across a wide variety of disciplines reveals significant implications for accounting research and practice. Based on the framework, theories, and prior evidence, we develop and discuss numerous directions for future research in accounting that could provide important insights into the efficacy of monetary reward systems. # 2002 Elsevier Science Ltd. All rights reserved.
1. Introduction Monetary incentives frequently are suggested as a method for motivating and improving the performance of persons who use and are affected by accounting information (e.g. Atkinson, Banker, Kaplan, Young, 2001; Horngren, Foster, & Datar, 2000; Zimmerman, 2000), and their use in organizations is increasing (Wall Street Journal, 1999). Further, researchers have been encouraged to employ incentives in experimental studies so that subjects are sufficiently motivated and participate in a meaningful fashion (e.g. Davis & Holt, 1993; Friedman & Sunder, 1994; Roth, 1995; Smith,
1982, 1991). Anecdotal and empirical evidence, however, indicates that monetary incentives have widely varying effects on effort and, consequently, oftentimes do not improve performance (Bonner et al., 2000; Camerer & Hogarth, 1999; Gerhart & Milkovich, 1992; Jenkins, 1986; Jenkins, Mitra, Gupta, & Shaw, 1998; Kohn, 1993; Young & Lewis, 1995). Consistent with this, accounting studies examining the effects of incentives on individual
Abstract The purpose of this paper is to review theories and evidence regarding the effects of (performance-contingent) monetary incentives on individual effort and task performance. We provide a framework for understanding these effects in numerous contexts of interest to accounting researchers and focus particularly on how salient features of accounting settings may affect the incentives-effort and effort-performance relations. Our compilation and integration of theories and evidence across a wide variety of disciplines reveals significant implications for accounting research and practice. Based on the framework, theories, and prior evidence, we develop and discuss numerous directions for future research in accounting that could provide important insights into the efficacy of monetary reward systems. # 2002 Elsevier Science Ltd. All rights reserved.
1. Introduction Monetary incentives frequently are suggested as a method for motivating and improving the performance of persons who use and are affected by accounting information (e.g. Atkinson, Banker, Kaplan, Young, 2001; Horngren, Foster, & Datar, 2000; Zimmerman, 2000), and their use in organizations is increasing (Wall Street Journal, 1999). Further, researchers have been encouraged to employ incentives in experimental studies so that subjects are sufficiently motivated and participate in a meaningful fashion (e.g. Davis & Holt, 1993; Friedman & Sunder, 1994; Roth, 1995; Smith,
1982, 1991). Anecdotal and empirical evidence, however, indicates that monetary incentives have widely varying effects on effort and, consequently, oftentimes do not improve performance (Bonner et al., 2000; Camerer & Hogarth, 1999; Gerhart & Milkovich, 1992; Jenkins, 1986; Jenkins, Mitra, Gupta, & Shaw, 1998; Kohn, 1993; Young & Lewis, 1995). Consistent with this, accounting studies examining the effects of incentives on individual