The Effect of Reward Frequency on Performance under Cash Rewards and Tangible Rewards

Recent trends in incentive compensation highlight two important features regarding performance-based rewards: (a) firms are offering rewards more frequently, and (b) firms are increasingly using tangible rewards in lieu of cash rewards to motivate employees. This study investigates how reward frequency and reward type jointly influence employee performance. Drawing on both economic and behavioral theories, we predict and find that increasing reward frequency improves employee performance over time and on average to a greater extent when employees are rewarded with cash rewards compared to when they are rewarded with tangible rewards. Results of our study contribute to both theory and practice by enhancing our understanding of the role reward frequency plays in motivating employee performance, and how its efficacy is affected by reward type