Abstract:

Companies increasingly adopt team pay-for-performance (PFP) as an important compensation strategy to motivate employees. While prior research has largely focused on the effects of team PFP on team performance, ignoring its potential influences on team innovation. Theoretically, team PFP will influence team identification, collaboration, and emotion, which are all important potential factors impacting team innovation. However, our knowledge of the relationship between team PFP and team innovation is limited. Given the important role of team innovation in building organizational competitiveness, this paper proposes a theoretical model linking team PFP and team innovation. Specifically, following the “generations of employee creative ideas—generations of team creative ideas—implementation of team creative ideas” process, this paper first theorizes how team PFP influences generations of employees’ creative ideas via team knowledge sharing and positive affect. It proposes that team PFP can increase employees’ cognitive flexibility via knowledge sharing and positive affect of team members, enhancing employees’ creativity. Additionally, the positive influences of team PFP will be more pronounced for teams with high cognitive diversity. Then, this paper focuses on generations of team creative ideas, and theorizes how team PFP affects team creativity through idea selections and integrations. Finally, this paper discusses how team PFP helps to improve the implementation of team creative ideas via resource utilization efficiency and conflict management, as well as the theoretical boundary role of team diversity in the above process.
This paper aims to contribute to the PFP and innovation literature in four ways. First, it enriches the PFP literature by theorizing the effectiveness of team PFP. Prior research has largely focused on the effectiveness of individual PFP while ignoring the influences of team PFP. Team PFP has become an increasingly important strategic motivational tool for facilitating team success. More importantly, team PFP fundamentally differs from individual PFP and is theoretically related to team innovation. By theorizing the effects and underlying mechanism of team PFP on team innovation, this paper enhances our understanding of the effectiveness of team PFP, which also complements prior research focusing on individual PFP.
Second, this paper provides new perspectives to the team PFP literature. Prior research has examined the impacts of team PFP using expectation theory and equity theory, which cannot fully explain the relationship between team PFP and team innovation. Team interaction, cognitions, and emotions are important factors explaining how teams’ innovation differs. This paper introduces team goal clarity, risk preference, emotion, and conflict management as underlying mechanisms linking team PFP and team innovation. By introducing new perspectives, this paper greatly enriches our understanding of the influence mechanisms of team PFP.
Third, this paper contributes to the relationship between employee creativity and team creativity. The first step in team innovation is the generation of creative ideas that often come from employees’ creativity. However, prior research has largely ignored how employees’ creative ideas emerge from the team’s creative ideas. Team members will pay different attention to and support different creative ideas from other members. This paper proposes that team PFP can foster the emergence of team creativity by increasing team goal clarity and risk preference. By revealing the emergence process, this paper can contribute to our understanding of the antecedents of team creativity.
Four, this paper provides an integrated framework for the process of team innovation. It not only theorizes how team PFP influences team creative ideas implementation from the cognitive and emotional perspectives but also emphasizes the team requirements for team creative idea implementation from the team resource and conflict perspectives. These integrated theoretical constructions will greatly increase our comprehensive understanding of the generation and implementation of team creative ideas in organizations. Finally, this paper also provides some practical implications for compensation strategy makers and managers to improve team innovation.

Key words: collective pay-for-performance, team innovation, team diversity