Adequate compensation systems have traditionally been identified with employee

Adequate compensation systems have traditionally been

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Adequate compensation systems have traditionally been identified with employee motivation and the notion that an increase in economic incentives will increase the performance level, which in many cases it does (Gneezy & Rustichini, 2000). Most of the previously mentioned authors found monetary rewards as relevant in several cases concerning KWs. Petroni & Colacino (2008) found that the compensation level is very important for engineers as a way to establish status and feel recognized as valuable assets in the company. The right level of compensation is a requirement more than a motivational tool. Similar results were obtained by Horwitz et al. (2003) who identified salary as an important variable in order to attract KWs to the company but not as relevant when motivating employees. However, in order to get a better understanding of the topic we look into a specific study about monetary rewards. Markova et al. (2011) looked at motivation, rewards and performance of 288 research and development employees in 30 large Fortune 500 companies. They took longer working hours and individual productivity as a sign of intrinsic motivation as intrinsically motivated workers will be willing to allocate more time to work activities. From their point of view, monetary rewards are not suitable for KWs as their jobs are complex and difficult to observe and measure, the task and behaviors such as thinking are difficult to codify, leaving the amount of time and effort they
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University of Electronic Science and Technology of China School of Management and Economic Strategic Management Page 13 Group 5 put into their work to the employee’s discretion. These arguments are strong and suggest that monetary rewards should not be found as relevant for KWs motivation. Their focus also looks at the relationship between employee compensation and intrinsic motivation, based on the crowding out theory (Deci, 1972). This theory supports the notion that external rewards can be unsuccessful in motivating workers as well as lessen their intrinsic motivation, thus extrinsic and intrinsic motivation could affect one another. Markova et al. (2011) hypothesis is that external rewards will diminish interest in a task and lower intrinsic motivation. Meaning that monetary rewards will lessen the workers’ intrinsic motivation in addition to not working as an extrinsic motivator for KWs. Intrinsically motivated employees appear willing to allocate more time to job activities which corresponds with better performance and innovation. Employees who received non-monetary rewards reported working longer hours. Thus not all external rewards have the same effect. This was a testing of the crowding out theory on KWs resulting in its rejection as not all the external rewards turns out to be detrimental for intrinsic motivation and working hours.
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