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Social incentives in organizations

Ashraf, Nava and Bandiera, Oriana (2018) Social incentives in organizations. Annual Review of Economics, 10. pp. 439-463. ISSN 1941-1383

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Identification Number: 10.1146/annurev-economics-063016-104324

Abstract

We review the evidence on social incentives, namely on how social interactions with colleagues, subordinates, bosses, customers, and others shape agents' effort choices in organizations. We propose a two-way taxonomy based on (a) whether the social group is horizontal (peers at the same level of the hierarchy) or vertical (individuals at different levels within or outside of the organization) and (b) whether the agent's effort creates externalities for the other members of their social group. We show settings in which social incentives improve productivity and settings in which they reduce it. In most cases, the size of the effect is approximately 10%, which is half of the typical effect of performance pay. We also show that social incentives can interfere with financial incentives, making them ineffective or even detrimental. We conclude that social incentives are a powerful motivator that must be taken into account in the design of organizational policies and that more research is needed to understand how policies can shape the preferences that underpin these incentives.

Item Type: Article
Additional Information: © 2018 Annual Reviews
Divisions: Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D9 - Intertemporal Choice and Growth > D90 - General
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M50 - General
Date Deposited: 20 Aug 2019 17:00
Last Modified: 20 Oct 2019 03:03
URI: http://eprints.lse.ac.uk/id/eprint/101421

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