On the relationship between intrinsic and extrinsic work motivation1

https://doi.org/10.1016/S0167-7187(96)01028-4Get rights and content

Section snippets

A neglected aspect

The principal-agent paradigm and the closely related theory of contracts, property rights and organization theory, as well as modern institutional economics in general have without doubt provided major insights for industrial relations. These theories have, however, been exclusively concerned with extrinsic work motivation and disregard intrinsic work motivation. Agency theorists consider the latter to be irrelevant for their purposes. When people work for intrinsic reasons the supply curve of

Intrinsic and extrinsic work motivation in perspective

Persons are intrinsically motivated if `work is performed for work's sake'. Many different conceptualizations of intrinsic preferences exist (see Deci and Ryan, 1985) but the phenomenon corresponds well to everyday observation and experience. For our purpose intrinsic work motivation is identified with work morale or work ethic.

Extrinsic preferences are activated from outside the person concerned. External interventions inducing persons to perform may be positive (mainly financial work

Conditions for crowding out

There are two requirements for work morale to be crowded out by external interventions: (A) The agent must have a (sufficiently) high intrinsic work motivation at the outset; and (B) conditions for crowding out intrinsic work motivation must be present. These two requirements will now be discussed in turn.

Consequences for work performance

Economists might argue that for their purpose the crowding-out effect is irrelevant. Not being interested in cognitive processes as such, but only in their effect on human behaviour, there does not seem to be any problem when intrinsic work motivation is substituted by an extrinsic one. Hence it is concluded that what kind of motivation that induces people to work is quite irrelevant.

This view is too simple because (A) the performance induced by intrinsic motivation is not necessarily

Implications for economics

This paper suggests a particular link between economics and psychology which has so far been neglected. This disregard exists quite generally: “The research...in those two disciplines has proceeded independently; for the most part there has been little cross referencing involved and few attempts to provide a synthesis of the research findings” (Nalbantian, 1987, p. 8). A recent survey on “Labor economics and the psychology of organizations” by Lazear (1991)shows that this situation has not

First page preview

First page preview
Click to open first page preview

References (39)

  • Adams, J.S., 1963, Towards an understanding of inequity, Journal of Abnormal and Social Psychology 67,...
  • Aoki, M., 1990, Towards an economic model of the Japanese firm, Journal of Economic Literature 28,...
  • Baker, G.P., M.C. Jensen and K.J. Murphy, 1988, Compensation and incentives: practice versus theory, Journal of Finance...
  • Barkema, H.G., 1995, Do job executives work harder when they are monitored? Kyklos 48,...
  • Becker, G.S. and G.J. Stigler, 1975, Law enforcement, malfeasance, and compensation of enforcers, Journal of Legal...
  • Condry, J. and J. Chambers, 1978, Intrinsic motivation and the process of learning, in: M.R. Lepper and D. Greene,...
  • Congleton, R.D., 1991, The economic role of a work ethic, Journal of Economic Behavior and Organization 15,...
  • Deci, E.L. and R.M. Ryan, 1985, Intrinsic motivation and self-determination in human behavior (Plenum Press, New...
  • Donaldson, L., 1980, Behavior supervision (Addison-Wesley, Reading,...
  • Frey, B.S., 1992, Tertium datur: pricing, regulating and intrinsic motivation, Kyklos 45,...
  • Frey, B.S., 1993a, Motivation as a limit to pricing, Journal of Economic Psychology 14,...
  • Frey, B.S., 1993b, Shirking or work morale? The impact of regulating, European Economic Review 37,...
  • Frey, B.S., 1994, How intrinsic motivation is crowded out and in, Rationality and Society 6,...
  • Friedman, M., 1970, The social responsibility of business is to increase its profits, reprinted in: T. Beauchamp and N....
  • Gordon, D.M., 1994, Bosses of different stripes: a cross-national perspective on monitoring and supervision, American...
  • Hayek, F.A., 1978, Competition as discovery procedure, in: F.A. Hayek, New studies in philosophy, politics, economies...
  • Holmström, B. and P. Milgrom, 1990, Multi-task principle-agent analysis: incentive contracts. asset ownership and job...
  • Jensen, M.C. and K.J. Murphy, 1990, Performance pay and top-management incentives, Journal of Political Economy 98,...
  • Kelman, St., 1983, Economic incentives and environmental policy: politics, ideology and philosophy, in: Th.C....
  • Cited by (212)

    • District attorney compensation and performance

      2023, International Review of Law and Economics
    • Occupational well-being, resilience, burnout, and job satisfaction of surgical teams

      2023, Handbook of Perioperative and Procedural Patient Safety
    • The effects of money saliency and sustainability orientation on reward based crowdfunding success

      2021, Journal of Business Research
      Citation Excerpt :

      Activities like one-way transfers are a prime example. For example, the use of monetary incentives in grants, gift giving, or blood donation could reduce exchange efficiency by crowding out suppliers' intrinsic motivations to act (Boulding, 1981; Frey, 1997b; Lacetera, Macis, & Slonim, 2013; Titmuss, 1970). In fact, the association with beliefs, hopes, and fears has generated a growing body of literature on the psychology of money (Lea, 2008; Trachtman, 1999).

    View all citing articles on Scopus
    1

    I am grateful for helpful comments to Iris Bohnet, Isabelle Busenhart, Reiner Eichenberger and Felix Oberholzer.

    View full text