Promoting Radical Innovation Through Performance-Based Rewards: The Mediating Role of Knowledge Acquisition and Innovative Work Behavior

Abstract

The purpose of this paper is to study the effect of performance-based rewards on radical innovation. In doing so, it explores the role of knowledge acquisition and innovative work behavior (IWB) as possible mechanisms that underlie the relationship between performance-based rewards and radical innovation. The subsequent effect of IWB on promoting radical innovation is explored. The study employs data from 235 unit managers in manufacturing and technology firms in Jordan. Structural equation modeling was used to test for reliability, validity, and the hypothesized relationships. The results indicate that performance-based rewards positively affect knowledge acquisition. In addition, knowledge acquisition mediates the link between performance-based rewards and IWB. IWB is also significant and positive in promoting radical innovation. This paper is one of the first to examine how radical innovation can be promoted through IWB. It offers insights into and contributions to the literature on the role of performance-based rewards in driving radical innovation through the mediating effect of knowledge acquisition and the subsequent impact of IWB on radical innovation.

The significance of individual, group and future knowledge at a business level through the knowledge-based lens

“…Extending from these implications, organisations also need to work on supportive strategies that enable the increase of their knowledge supplies (RQ2), for instance, encouraging their members to seek knowledge both internally and externally. In investigating line managers in technology and manufacturing firms, Thneibat et al (2022) ascertained the juxtaposition between knowledge acquisition and performance-based rewards. Rewards can be extrinsic, such as money, prizes, job security, promotion, social recognition or fringe benefits (Mottaz, 1985;Murayama, 2022).…”

Cultivando talentos de inovação estratégica em organizações estabelecidas: o papel das práticas de gestão de recursos humanos.

“…Despite that, there is evidence that innovative companies tend to use intrinsic rewards with strategic innovation employees, providing extrinsic rewards exclusively for executive positions (Shaikh & O'Connor, 2020). Furthermore, there is a divergence in whether performance-based pay has a positive (Andreeva et al, 2017;Hebda et al, 2012;Leifer et al, 2000;Marvel et al, 2007;O'Connor et al, 2018;O'Connor & McDermott, 2004;Thneibat et al, 2022) or negative (Beugelsdijk, 2008) impact on the development of strategic innovation. The nature of the reward practice may explain this contradiction.…”

“…It is largely advocated by scholars that incentive and motivation practices are strongly correlated with innovation (Farouk et al, 2016;Katou & Budhwar, 2010;Koberg et al, 1996), as rewards foster innovative work behavior (Thneibat et al, 2022), and there is evidence that they may enhance the company's performance when they meet the competitive requirements of the firm's strategic intent (Beugelsdijk, 2008).…”

“…Whereas many papers claim that financial incentives can have a positive impact on the development of strategic innovation (Andreeva et al, 2017;Hebda et al, 2012;Leifer et al, 2000;Marvel et al, 2007;O'Connor & McDermott, 2004;Thneibat et al, 2022), for Beugelsdijk (2008) Marx et al (2016) declare that a reward system implementation aimed at strategic innovation needs a genuine intent to innovate from the firm, represented by solid support from the TMT; an alignment with other HR processes for innovation, reinforcing the same messages for employees; a strong involvement of the low and middle managers in the rewards system's design; and to prepare employees for the use of risk rewards, using clear communication, training, and impact analysis to manage changes. Zhang & Jin (2014) proposed a situational experiment to be used as training to deal with strategic innovation challenges.…”

“…Most papers that address HRM and strategic innovation management are qualitative researches, mainly characterizing the inconsistencies between traditional HRM practices and strategic innovation management attributes, its possible consequences, some possibilities to facilitate strategic innovation management issues, and what motivates strategic innovation employees (Aagaard, 2017;Bruneel et al, 2012;Fowinkel, 2014;Hebda et al, 2012;Kelley et al, 2011;Lettice & Thomond, 2008;Marvel et al, 2007;Marx et al, 2016;O'Connor et al, 2018;O'Connor & McDermott, 2004;Oltra et al, 2022;Shaikh & O'Connor, 2020). While quantitative papers appointed that HRM is positively related to strategic innovation and assessment practices may have a positive correlation, there was no consensus about whether reward practices have a positive correlation with innovation or not (Andreeva et al, 2017;Beugelsdijk, 2008;Cavagnoli, 2011;Cho & Kim, 2017;Thneibat et al, 2022).…”