Does pay for individual performance truly undermine employee creativity? The different moderating roles of vertical and horizontal collectivist orientations

Abstract The extant literature has generated inconclusive findings concerning the effect of pay for individual performance (PFIP) on creativity. Supplementing self‐determination theory with compensation‐activation theory, we theorized and tested the moderating roles of individual cultural values of vertical and horizontal collectivist orientations on the relationship between PFIP and employee creativity as mediated by intrinsic motivation. The empirical results of two field studies provided convergent support for the intrinsic motivation mechanism underlying the positive relationship between PFIP and employee creativity among individuals with high vertical (but not horizontal) collectivist orientations. These findings highlight the importance of considering individual differences in cultural values in understanding how extrinsic rewards affect creativity.