LAUSR

ABSTRACT Motivation crowding theory (MCT) argues that performance-related pay (PRP) can crowd out intrinsic motivation, with detrimental consequences for employees’ willingness to exert effort, but this mechanism is only expected when PRP is perceived to be controlling. However, the issue of whether the mechanism is motivational, as expected, has not been tested. This article finds support for such expectations using a vignette survey experimental setup of 1,150 responses (from 384 respondents). The results indicate that PRP positively affects organizational citizenship behavior (OCB), but that the effect is reduced significantly when PRP is perceived as a control factor, because the importance of intrinsic motivation for effort is weakened. Thus, PRP can cause a cognitive shift from intrinsic to extrinsic orientation, but only if PRP is perceived as controlling. When PRP is perceived as noncontrolling, the importance of intrinsic motivation can actually increase. The findings imply that PRP is not necessarily harmful, and that managers should pay close attention to how their employees perceive performance-based pay systems.