A Performance Motivator in One Country, a Disincentive in Another?

New Institutional Economic Analysis of Performance Incentives in a Cross-National Setting

Abstract

This research employs the following three constructs: the Institutional Framework and its formal and informal implications for incentive compensation, Diminishing Marginal Utility of individuals related to performance rewards, and the Incentive System as a motivational device in the organizational work environment. We have conducted an empirical study using an enriched form of Hofstede's cross-cultural questionnaire to examine employees of one MNC in China, Germany, Japan and the USA. Our results show that employees from these countries have different preferences on incentives and that incentive plans designed for one country might not even have motivating consequences in the others. We also find that the logic of diminishing marginal utility applies to certain rewards. We suggest a method for organizations to develop efficient incentive systems.