Abstract
In a recent influential study, Kachelmeier and Williamson (2010;
KW) extend a series of experimental accounting papers investigating
whether sorting contracts effectively sort employees into high- and
low-creative types. KW provide evidence that the sorting value of
contracts rewarding creativity is limited to the initial (i.e.
short-run) production of creative ideas. This result seems to imply
that firms interested in hiring high-creativity individuals would
be better off - in terms of maximizing creative output - if they
compensated employees using a one-dimensional contract rewarding
quantity alone. Yet, the underlying premise of the balanced
scorecard seems to be that multi-dimensional contracts improve
realized outcomes. This study experimentally examines whether KW's
findings are influenced by the depletion of an internal cognitive
resource that may not impact these contracts in practice.
Experimental results are opposite the findings of KW. I also find
that operationalized cognitive resource replenishment using glucose
appears to move worker productivity opposite the predicted
direction. Further analyses demonstrate the importance of
considering the underlying psychological and physiological
mechanisms in research evaluating the effectiveness of
multi-dimensional incentive contracts.
Table of Contents
I. Introduction 1
II. Background, Theory and Hypothesis 3
III. Method 10
IV. Results 13
a. Contract Selection Benefits 14
b. Hypothesis Tests 16
V. Conclusions 20
VI. References 24
VII. Figures 26
a. Figure 1 26
b. Figure 2 27
c. Figure 3 28
d. Figure 4 29
e. Figure 5 30
VIII. Tables - Descriptions 31
a. Table 1 32
b. Table 2 35
About this Master's Thesis
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