The dirty side of money: How extrinsic incentives jeopardize knowledge sharing

Cooperation and knowledge sharing among employees often lead to increased innovation. In this study, we explore the influence of a flatter organizational structure implementing lateral integrative mechanisms and the individuals’ intrinsic motivation on employees’ participation in exchanging their ideas and know-how with others in the organization. We then relate these two aspects to the provision of extrinsic rewards (e.g., higher salary, bonuses, etc.) for knowledge sharing. The empirical analysis run on a sample of 754 employees from 23 international manufacturing firms shows that extrinsic incentives may significantly hamper the positive effect of both lateral integrative mechanisms and intrinsic motivation on knowledge sharing, thus resulting in a detrimental factor for employees’ social relationships and helpful behaviors. We thus provide evidence of the importance of appropriately designing an incentive plan that fosters knowledge exchange, yielding creativity and firms’ superior performance.