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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Agency Theory, Performance Evaluation, and the Hypothetical Construct of Intrinsic Motivation
Organization Unit
Authors
  • Alexis H Kunz
  • Dieter Pfaff
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Accounting, Organizations and Society
Publisher Elsevier
Geographical Reach international
ISSN 0361-3682
Volume 27
Number 3
Page Range 275 - 295
Date 2002
Abstract Text Cognitive evaluation theory and its hypothetical construct of intrinsic motivation are enjoying increasing popularity in the fields of business administration and economics. Consequently, intensifying skepticism towards performance incentives and agency theory is postulated. According to cognitive evaluation theory, it is argued that performance pay may undermine an agent's intrinsic motivation. In contradiction to agency theory, the principal might be worse off when providing an incentive contract to the agent than without doing so. Since the contention is substantiated by empirical evidence, it seems worrying enough for further investigation. Restricting attention to performance pay in business corporations, the scope of this article is to evaluate whether agency theory faces an urgent need to incorporate the construct of intrinsic motivation and its ‘hidden costs of reward' as postulated by supporters of the concept. The subsequent analysis reveals good and bad news for agency theory. The bad news is that hidden costs of reward do indeed exist. The good news is that the empirical evidence on undermining effects cannot be interpreted as being contradictory to agency theory. In particular, the antecedents for such effects not only seldomly prevail in business corporations, they are also easily avoidable.
Digital Object Identifier 10.1016/S0361-3682(01)00031-9
Other Identification Number merlin-id:5124
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