Unrelenting Innovation by Tellis Gerard J.;

Author:Tellis, Gerard J.;
Language: eng
Format: epub
Publisher: John Wiley & Sons, Incorporated
Published: 2012-11-27T00:00:00+00:00

Social Incentives

In 1993, the Swiss government identified two small towns as potential repositories of the country's nuclear waste program.20 Many of the townspeople were deeply concerned about the prospect of living so close to a nuclear waste repository. Two researchers tested the effectiveness of incentives in motivating people to accept the repository. They first surveyed respondents to ascertain their base receptivity to the repository. Fifty-one percent of the people agreed to the location. To increase receptivity to the repository, the researchers repeated the survey with three different levels of compensation: $2,175, $4,350, and $6,525. However, the receptivity to the repository declined by about half when the incentive was offered, without significant difference across the three levels. All those who rejected the first incentive were then made a fresh offer with a higher incentive: from $2,175 to $3,263, from $4,350 to $6,525, and from $6,525 to $8,700. Only one new person was willing to accept the repository at the higher offer. What explains this economically irrational behavior?

The first 51%, who were receptive to the repository, probably did so out of a sense of social obligation—a feeling of national pride or a sense that it was the fair sacrifice for the common good. When money was introduced into the equation, it may have put a monetary value on the choice. For some, this value was probably less than the social obligation. For others, it may have appeared as a choice of making quick money versus the dangers of the dumpsite. This case shows that the power of social incentives was more effective than the pull of economic incentives.

What could have been done? A better strategy would have been for the government to more clearly explain to residents the social benefits of the repositories of the nuclear waste program that motivated the scheme in the first place and appeal to their sense of social obligation.

Firms can use moral, social, and monetary incentives to motivate employees. As the previous examples illustrate, moral and social incentives are more powerful than monetary at reasonable price levels and can cost less. Thus, a public award ceremony (costing $1,000) to acknowledge the innovator of the year can do more than a private prize of $1,000, because of the huge social payoff from the former. When firms are seeking deep commitment from employees for work beyond the usual hours or creativity beyond the normal, social incentives can play a big role. Unpriced perks at work such as gourmet meals, free drinks, and massages can build a social contract with employees that can motivate them to give beyond their monetary hiring contract. Behavioral economist Dan Ariely says, “Money, as it turns out, is very often the most expensive way to motivate people.”21

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