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Innovation and Entrepreneurship Research

No eureka! Incentives Hurt Creative Breakthrough Irrespective of the Incentives' Frame

Kleine, Marco (2021). No eureka! Incentives Hurt Creative Breakthrough Irrespective of the Incentives' Frame, Max Planck Institute for Innovation & Competition Research Paper No. 21-15.

We investigate the effect of financial incentives, framed as gains and losses, on creative breakthrough. Rather than originating merely from diligent work, creative breakthrough entails a eureka-moment – the sudden insight and the radical reorganization of ideas for the solution of a problem. We argue that financial incentives can be detrimental for creative breakthrough. Moreover, framing financial incentives as losses may lead to particularly strong detrimental effects, compared to incentives framed as gains. We test our hypotheses in a laboratory experiment using a classical paradigm to investigate creative breakthrough: the candle problem (Duncker 1945). We find causal evidence that, relative to a condition without performance-contingent incentives, financial incentives are counterproductive for creative breakthrough. This holds true for financial incentives framed as gains as well as for those framed as losses. We do not find any significant differences arising from the framing of incentives. Financial incentives and the loss framing of incentives are classical managerial tools for enhancing employee performance. They have proven effective for routine tasks. Our results, however, suggest that their success cannot be generalized to work environments that build on people's ability to achieve breakthroughs via eureka-moments.

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