Personality Traits and Incentives

• Applicants: Professorin Dr. Sara Bormann; Professor Dr. Michael Kosfeld; Professorin Dr. Anna Rohlfing-Bastian
• Subject Area: Accounting and Finance
• Term: since 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 468818398

In this research project, we analyze the impact of personality traits on (1) the self-selection of people into specific working environments and (2) on the relationship between elements of organizational design, in particular task complexity, monetary incentives, and feedback. We perceive personality traits to be an omitted variable in many prior studies on individual behavior and aim to support this hypothesis with a laboratory experiment that includes different treatments for incentive elements, task complexity, and self-selection versus random assignment into a particular task.Firms design incentive systems with different elements to motivate employees. Typically, a combination of incentive elements is used to stipulate effort and performance, and it is important to consider how these elements work in combination. In past research, different incentive elements have been found to be either substitutes or complements, without identifying a consistent explanation for these seemingly contradicting results. At the same time, previous research has shown that personality traits can impact the effectiveness of different incentive elements. We aim to find out whether personality traits can potentially explain inconsistent empirical findings with respect to the direct and indirect effects of incentive elements. Prior psychology and economics literature also suggests that personality traits impact the self-selection into working environments, such as job and/or incentive design. This raises the question to what extent observed differences in relations among organizational design elements are attributable to contextual factors or relate to differences in personalities that have self-selected into or selected out of specific contextual factors.To summarize, we investigate whether personality traits predict self-selection into different working environments and whether self-selection affects how these people respond to incentives. Moreover, we analyze whether people with different personality traits differ in their response to combinations of incentives, in particular, monetary incentives, feedback, and task complexity. We introduce personality traits as a new agent-level factor beyond classic firm-level contextual factors (strategy, environmental uncertainty, etc.) that impacts these types of decisions. Accordingly, the proposed research project is a prelude to what we see as a larger promising research agenda in accounting and economics. In the present proposal, we focus on individual tasks and incentives as a first step, which we intend to extend to team settings in future studies. We believe that many additional research questions may be stipulated by our project.

• DFG Programme: Research Grants