What Makes Them Tick? Employee Motives and Firm Innovation

Abstract

Economists studying innovation and technological change have made significant progress toward understanding firms' profit incentives as drivers of innovation. However, innovative performance in firms should also depend heavily on the pecuniary and nonpecuniary motives of the employees actually working in research and development. Using data on more than 1,700 Ph.D. scientists and engineers, we examine the relationships between individuals' motives (e. g., desire for intellectual challenge, income, or responsibility) and their innovative performance. We find that motives matter, but different motives have very different effects: Motives regarding intellectual challenge, independence, and money have a strong positive relationship with innovative output, whereas motives regarding job security and responsibility tend to have a negative relationship. We also explore possible mechanisms underlying the observed relationships between motives and performance. Although hours worked (quantity of effort) have a strong positive effect on performance, motives appear to affect innovative performance primarily via other dimensions of effort (character of effort). Finally, we find some evidence that the role of motives differs in upstream research versus downstream development.