Faculty of Economics and Business Administration Publications Database

How to handle intrinsic and extrinsic motivation in German Start-Up companies

zu Knyphausen-Aufseß, Dodo
Abstract: Growth-orientated start-up companies have a clear tendency of introducing direct employees ownership or stock option programs with the goal of significantly increasing the motivation and the long-term commitment of their employees. This bears some problems, if - besides the extrinsic motivation - the intrinsic motivation is considered as playing also an important role. This may result in a substitution effect: the employees of the company are getting paralysed by the introduction of these ownership-orientated incentive systems, because, somehow, they loose the joy of their work, and from this moment on only aim at making much money as quickly as possible. Hence, the introduction of such an incentive system, limited to only a small number of executives, may make their co-employees, who are not participating in this program, jealous. As a result, the collaboration between these two groups may become much more difficult. Especially in start-up companies, which are rather dominated by an egalitarian culture, this problem may cause lots of trouble. Following this argumentation, it might be possible that the mentioned positive correlation between the introduction of a direct employees ownership or stock option program and the profit of the company will be weakened or, even worse, will be overcompensated by the negative impact of intrinsic de-motivation. These reflections may indicate that the introduction of equity-based incentive systems may be connected with a few puzzles, which are neither theoretically nor empirically solved. On the basis of some theoretical considerations concerning the substitution effect and an empirical capturing of the direct employees ownership and stock option programs, which have been introduced by the companies listed on the "Neuen Markt", the German equivalent to the NASDAQ in the U.S. or the "Nouveau Marche" in France, we hope to make a contribution in order to solve some of these puzzles. In our research we want to answer the following questions: 1. How do the equity-based incentive systems at the "Neuen Markt" look like? Of special interest is of course: how many employees are allowed to participate, and what is the relationship between the variable and fix part of their incomes? 2. Are there significant performance differences between companies, which limit the participation in such incentive programs to top-executives and, by this, following the logic of the traditional economic theory, and those, which (intentionally or unintentionally) enlarge the number of employees involved, considering the consequences for the intrinsic motivation? 3. Are companies, having introduced the first kind of incentive system, applying means in order to prevent the substitution of intrinsic by extrinsic motivation? 4. Is it possible to identify some specific conditions under which the one or the other kind of incentive system is more promising?
Keywords: Arbeit; Angestellter; Lohn; Anreizsystem; Motivation; Bundesrepublik Deutschland; Unternehmensgründung; Wertpapier
Year: 2001
Link External Source: Online Version
Book Title: Frontiers of entrepreneuship research 2001
Editor: Bygrave, W.D. et al.