This paper reports the results from a large-scale laboratory experiment that compared the impacts of a performance bonus and a wage gift on output from a creative task and a simple task. We find that the performance bonus substantially increases output in both the creative task and the simple task. By comparison, the wage gift increases output only in the simple task. Additional experimental treatments suggest that reciprocity in the creative task is inhibited because agents are uncertain about how their efforts affect the payments that accrue to the principal as a result of the agents’ work.

We study a field experiment at a large technology company. Employees were encouraged to submit ideas on process and product improvements. The company randomly assigned nineteen teams into treatment and control groups. Treatment team employees received rewards if their ideas were approved. Nothing changed for control team employees. Our main finding is that rewards substantially increased the quality of ideas. Rewards increased participation in the suggestion system but decreased ideas per participating employee, with no net effect on the quantity of ideas. Broader participation persisted after the reward was discontinued, suggesting habituation. We find no evidence for motivational crowding out.