Performance-based Incentives and Emerging Search Behavior: Results of...

The strategies organizations employ when searching for superior solutions to their overall decision problem is among the key issues of managerial science. Accordingly, various streams of research are addressing this topic - be it, for example, in domains like innovation, organizational design or management control systems. There is a considerable body of research on the effects of management control systems on innovation at the organizational level; in contrast, the effects of incentives on the organizational members' propensity to search for novel solutions, so far, has been studied to a lesser extent. Against this background, the paper studies how different types of pay-for-performance aect the search behavior employed by subordinate decision-makers. For this, an agent-based simulation based on the framework of NK tness landscapes is applied which allows to control for the level of complexity of the organizational decision problem to be solved. The findings suggest that the emerging search behavior is subtly affected by the subordinates' objectives as shaped by the incentive system in conjunction with task complexity. In particular, the results indicate that the fundamental trade-off between stabilization of achievements and alterations in favor of the novel as incorporated in different search strategies is affected by the incentive system.