Introduction:

Group incentives are HR practices that allow employees to share the companys financial
outcomes. These practices include various forms of group-based, pay-for-performance
plans, such as profit sharing and gain sharing plans. Since this study deals with
organizational-level variables, it focuses on group incentives rather than individual
incentives.
Research on group incentives has focused on the effects on organizational performance,
especially productivity and financial performance. These studies support the idea that
group incentives affect organizational performance positively by motivating employees to
work harder and more efficiently because their earnings are tied to the organizations
performance.
So, this study has two main objectives. First, it examines the underlying mechanisms
through which group incentives affect financial performance, using organizational
commitment as a mediator. Second, this study investigates the moderating roles of
innovation in the relationships between (a) group incentives and organizational
commitment, and (b) group incentives and financial performance. Thus, the findings of
this study have implications for how group incentives can improve financial performance
and which organizations in particular should provide their employees with group
incentive practices.

Theory & Hypotheses:

Here in this research, the researcher took one mediator and one moderator. The researcher
took Organizational Commitment as a mediator that has a direct effect on the
relationship between group incentives and organizational performance. And the
researcher also took Innovation as a moderator that changes the relationship of group
incentives with organizational commitment and the relationship of group incentives with
organizational performance.
HYPOTHESES :
Hypothesis 1: Organizational commitment will mediate the relationship between group
incentives and organizational performance.
Hypothesis 2: The relationship of group incentives with organizational commitment will
be greater in more innovative companies than in less innovative companies.

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MODERATING ROLE OF INNOVATION

Hypothesis 3: The relationship of group incentives with organizational performance will

be greater in more innovative companies than in less innovative companies.

Methodology:
SAMPLE:
The sample was selected by stratified random sampling based on industry, size and public
status, among companies with 100 employees or more in the KIS database. The survey
team randomly selected the managers and employees. All of the selected companies and
92per cent of selected employees participated in the survey. A total of 454managers and
13,101 employees were surveyed using a self-report form. In each company, 3
92employees (29 on average) completed the survey.
INSTRUMENT:
The instrument that was used to collect data was a questionnaire. In this questionnaire the
researcher measure Group Incentives by two codes (1 & 0). 1 represent they had group
incentives and 0 represent they hadnt. And the researcher use 5-point likert-type scale
ranging from 1 to 5for measuring Innovation & Organizational Commitment.Although
financial performance has been measured by a number ofindices in the literature, we
measured it by return on assets (ROA).

Findings:
The correlations result is showing that groupincentives were positively correlated with
company size, average wage and level of innovation. Group incentives also had
significant correlations with organizational commitment and ROA. Innovation was
2 GROUP INCENTIVES & FINANCIAL PERFORMANCE: THE

MODERATING ROLE OF INNOVATION

significantly correlated withorganizational commitment but

Organizational commitmentwas significantly correlated with ROA.
ORGANIZATIONAL COMMITMENT

AS A

not

with

ROA.

MEDIATOR :

Here the researcher uses three models to test this variable. In Model 1, group incentives
had a significant relationship with organizational commitment. Model 2 shows that group
incentives had a significant relationship with ROA. These findings support a universal
approach and suggest that providingemployees with group incentives is positively
associated with organizational commitment andfinancial performance.
Model 3 examined whether organizational commitment was significantly relatedto
financial performance after controlling for group incentives. Organizational commitment
wassignificantly related to ROA. The relationship of group incentives with ROAwas
lower in Model 3 than in Model 2. After doing all calculations the models satisfied all of
the conditions, which confirmed that organizationalcommitment mediated the
relationship between group incentives and financial performance.These results support
Hypothesis 1. Since group incentives were still significantly related toROA in Model 3,
organizational commitment played a role as a partial mediator.
INNOVATION

AS A

MODERATOR :

Here the researcher uses two models to test this variable. Model 1 examines the
moderating role of innovationin the relationship between group incentives and
organizational commitment. The interactionbetween group incentives and innovation was
significantly related to organizational commitment. That is, the relationship of group
incentives with organizational commitment was greater in more innovative companies
than in less innovative companies,which supports Hypothesis 2.

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MODERATING ROLE OF INNOVATION

Model 2 investigates the moderating role of innovation in the relationship of

groupincentives with financial performance. The interaction term indicated that group
incentives hada greater relationship with ROA in more innovative companies, which
supports Hypothesis 3. These results support a contingency approach, suggesting that
therelationships of group incentives with organizational commitment and financial
performancewere contingent on the degree of innovation of individual companies.
Specifically, moreinnovative companies benefited more from providing their employees
with group incentivesthan did less innovative companies.

ADDITIONAL ANALYSIS:
The above results do not clearly support either the universal or contingency approach.
From the 1st graph, we found that group incentives might not be a best practice for less
innovative companies. So, this research did not examine the possibility that certain types
of companies might not benefit fromthose practices.
To examine the possibility, the researcher calculated the significance of the simple slopes
of more and lessinnovative companies. The slopes of both dependent variables were
significantly different fromzero in more innovative companies, but they were not
significantly different from zeroin less innovative companies. Thus, results of this
supplementary analysis support acontingency approach rather than a universal approach.
So group incentives are not the best practice for all companies.

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MODERATING ROLE OF INNOVATION

Conclusion:
This study provided evidence on the role ofinnovation as a moderator. The findings of
this article provide implications on how groupincentives affect financial performance and
which organizations in particular are likely tobenefit most from providing their
employees with group incentive practices. These results wereobtained from analyses
conducted with nationally representative and multiple-source data(managers, employees
and financial data).
This study suggests that group incentives may not be a best practice for lessinnovative
companies. The significant relationships between group incentives andorganizational
commitment and ROA resulted mainly from the strong relationships in moreinnovative
companies.

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MODERATING ROLE OF INNOVATION