On the Effectiveness of Incentive Pay: Exploring Complementarities and Substitution between Management Control System Elements in a Manufacturing Firm

Abstract

Extant research already emphasises that complementarities and substitution involving incentive pay and other elements of an organisation's management control system play an important role in terms of explaining the effectiveness of incentive systems. Despite this awareness calls continue for more research addressing the need to better understand how interdependencies arise among management control system elements and how they affect organisational effectiveness. Based on an in-depth case study on the implementation of a new incentive system in a manufacturing firm, we seek to provide more research and insight into how incentive pay features in complementary and substitutional relationships in an individual organisational setting. Greater insight can help illustrate how complementary and substitutional relationships unfold in even more complex ways than current research indicates, as well as how the effectiveness of the incentive system in the individual organisational setting is determined by these relationships.