Is money the panacea? Rewards for knowledge workers

Purpose - In this empirical study, the aim is to examine the relative effect of various rewards on performance of knowledge workers. It is predicted that non‐monetary rewards are associated with enhanced intrinsic motivation, which in turn is related to better performance and innovation. Design/methodology/approach - Data were collected from 288 research and development employees and their supervisors from 30Fortune500 companies. The authors tested the hypothesized relationships with mediated multiple regression. Findings - The results revealed that receiving non‐monetary rewards is a stronger predictor of intrinsic motivation manifested by longer work time in comparison to either group or individual monetary rewards. Furthermore, intrinsic motivation was found to fully mediate the relationships between received non‐monetary rewards and performance and innovation. Research limitations/implications - The paper offers a field test of the cognitive evaluation theory and the crowding theory that have been mainly applied in experimental research and suggests a potential limit to the efficiency wage models in the case of knowledge workers. However, causal conclusions are limited by the cross‐sectional nature of the data and the operationalization of intrinsic motivation is not without its critics. Practical implications - The study findings suggest that incorporating non‐monetary rewards in reward systems is necessary to encourage productivity and creativity of knowledge workers. Organizations should critically evaluate all aspects of their reward systems to reflect the uniqueness of their employees. Originality/value - The increased importance of innovation for business success mandates that organizations design their reward systems to stimulate creative behaviors. The study results show the importance of non‐monetary rewards over monetary for knowledge workers’ intrinsic motivation.