Can Performance Pay Spark Academic Insights?

Erina Ytsma, Tepper School Assistant Professor of Accounting, speaks about her research on the effects of performance pay in knowledge creation.

Video Transcript

In this day and age, a lot of us actually produce new insights and that could be in various ways, either as a creative artist or need as a software developer, you produce new applications, new features. How do you motivate them to do more of that better work in that area? That's what a lot of my work focuses on.

The name of my paper is Effort and Selection Effects of Performance Pay in Knowledge Creation. Performance pay is used a lot as a tool to incentivize workers, but we don't have a very clear understanding of what it is ultimately. Is it a useful or an efficient tool for stimulating knowledge?

There is a rather lively debate in Europe about how to structure the academic sector in general. And the very fact that there was a really clear cut introduction of this performance-based system that only affects some of the academics while others are unaffected, allows me to actually then compare the productivity by looking at publications. And so, that gives both a quantity measure and when you look at, for instance, the citations that those publications garner, you'd also have a quality measure.

I do find that the overall quality-weighted number of publications goes up. I see most of the increase and output happen on the quantity margin. Someone would, generally speaking, write three very impactful papers in any given year. Now they write a fourth paper. That fourth paper is just not as impactful as the other three.

The incentive system is designed such that both quantity and quality are taken into account. That seems to be a good step or a step in the right direction, not just incentivizing quantity, but also taking this quality metric into account.