Crowding‐out or crowding‐in? Direct voice, performance‐related pay, and organizational innovation in European firms

Building on motivation crowding theory (MCT), this article contributes to the human resources management (HRM)‐innovation debate by examining the potential trade‐offs between HRM practices targeted to increase employees' intrinsic motivation, such as direct employee voice (EV), and the presence of extrinsic incentives in the form of individual and collective performance‐related pay (PRP). The results of the analysis on more than 22,000 European establishments show support for the positive relationship between EV and a firm's organizational innovation, and that this relationship is weaker in companies that adopted individual PRP schemes (piece‐rate plans). Moreover, while we found that collective PRP (profit‐sharing) does not moderate the relationship between EV and organizational innovation, a positive and significant moderation effect emerged when the combined presence of individual and collective PRP was considered. By advocating that the coexistence of multiple forms of PRP could overcome the crowding‐out effect of individual PRP on EV, the study contributes to the HRM debate by also calling for a better understanding of the potential contingencies between different HRM practices when innovation is focus of the analysis.