Financial rewards for R&D scientists: Motivational characteristics, equity issues and relationships to organizational innovation and profitability

A conceptual model was developed proposing the nature of the relationships between financial rewards for R&D scientists, and motivational as well as organizational outcomes. Previous literature on reward, motivation and organizational effectiveness theory were reviewed, and provided the basis for the development of the model. The research variables of interest were total cash compensation (i.e., base salary plus bonus) for R&D scientists, organizational innovation and profitability, and micro (individual) level variables such as level of effort and perceptions of equity. A total of 20 large private sector industrial companies which are committed to corporate R&D, constituted the study sample. Data on total cash compensation and organizational profitability were collected at four different points in time (corresponding to the years 1987-1990). In addition, data about the non-financial (e.g., motivational) characteristics of compensation programs for R&D scientists, as well as data on organizational innovation, were collected in 1990.; A total of six hypotheses suggested by the conceptual model were tested. The first group of hypotheses (Hypotheses 1-5) tested the relationships illustrated in the conceptual model using correlational analysis. The data supported several of the proposed hypothetical propositions. Among some of the most significant findings, effort was positively related to organizational innovation. Interestingly, the proposed positive relationship between organizational innovation and organizational profitability was not supported by the data.; Hypothesis Number 6 tested for the causality between the variables of total cash compensation and organizational profitability. A cross-lagged correlation analysis yielded no statistically significant results. Post-hoc analyses focusing only on bonus paying companies yielded statistically significant and consistent results supporting the hypothesized positive relationship between total cash compensation and profitability. The findings also suggest that profitability and total cash compensation appear to have a reciprocal causal relationship. That is, companies which are more profitable are able to provide higher levels of total cash compensation. At the same time, companies which provide higher pay perhaps achieve their desired motivational and innovation outcomes, ultimately resulting in higher profitability. Future research directions were suggested to further explore these issues.