Structural and Relational Influences on the Role of Reward Interdependence in Product Innovation

Abstract

This study examines the relationship between reward interdependence, or the extent to which managers' rewards are tied to the performance of colleagues in other functions, and product innovation. It also considers how structural and relational features of the organizational context might moderate this relationship. Our analysis of a sample of Canadian-based firms reveals a positive relationship between reward interdependence and product innovation that is invigorated at higher levels of job rotation, social interaction, and interactional fairness, but we find no evidence of a moderating effect of decision autonomy. Consistent with a systems approach to organizational contingencies, we also find that the reward interdependence–product innovation relationship is stronger when the organization's context comes closer to an ‘ideal’ holistic configuration that is most conducive to knowledge exchange within the organization, with a more prominent role played by the relational sub-context (social interaction and interactional fairness) than the structural sub-context (job rotation and decision autonomy). The findings have important implications for innovation research as they shed light on how the extent to which individual rewards are tied to collective performance can be channeled to enhance innovation pursuits.