When is pay for performance related to employee creativity in the Chinese context? The role of guanxi HRM practice, trust in management, and intrinsic motivation

• Author: Yong Zhang,Tsung‐yu Wu,Xu Huang,Lirong Long
• Date: 01 July 2015
• Published date: 01 July 2015
• DOI: http://doi.org/10.1002/job.2012

When is pay for performance related to employee

creativity in the Chinese context? The role of guanxi

HRM practice, trust in management, and intrinsic

motivation

YONG ZHANG

1

*, LIRONG LONG

2

*, TSUNG-YU WU

3

AND XU HUANG

4

1

College of Economics & Management, Huazhong Agricultural University, Wuhan City, Hubei Province, China

2

School of Management, Huazhong University of Science & Technology, Wuhan City, Hubei Province, China

3

Department of Psychology, National Taiwan University, Taipei, Taiwan

4

Department of Management and Marketing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

Summary This study aims to provide new insights into the reward–creativity link in the Chinese context by exploring

the moderating effect of guanxi human resource management (HRM) practice—reflecting the extent to which

HR decisions are influenced by personal relationships in an organization—on the relationship between pay for

performance (PFP) and employee creativity. Using two independent samples that were composed of 222 and

216 supervisor–subordinate dyads from Mainland China and Taiwan, we found that the effect of pay for

performance on creativity was invariantly moderated by perceived guanxi HRM practice in such a way that

when guanxi HRM practice was low, PFP had stronger positive effects on creativity. Furthermore, trust in

management, as reduced by guanxi HRM practice, mediated this moderating effect. Moreover, moderated

path analysis revealed that intrinsic motivation mediated these moderated relationships among PFP, guanxi

HRM practice, trust in management, and creativity. Findings shed light on the processes through which,

and the conditions under which, PFP may promote creativity. Copyright © 2015 John Wiley & Sons, Ltd.

Keywords: creativity; pay for performance; guanxi HRM practice; trust in management; intrinsic motivation

Introduction

Since the “Reform and Open Policy”era starting in 1978, an unprecedented change in Chinese firms is the

implementation of pay for performance (PFP), a pay system that is widespread in Western countries. Although

the use of PFP has greatly enhanced the productivity of Chinese firms, the innovative ability of most Chinese firms

still largely lags behind that of their Western counterparts (Abrami, Kirby, & McFarlan, 2014). As a firm’s innova-

tion depends, in part, on the creativity of its employees (Woodman, Sawyer, & Griffin, 1993), it is of both theoretical

and practical importance to understand whether PFP promotes or undermines Chinese employees’creativity.

Theoretically, the extant literature suggests that PFP can enhance creativity only under certain conditions (Baer,

Oldham, & Cummings, 2003; Byron & Khazanchi, 2012; Eisenberger & Rhoades, 2001; Malik, Butt, & Choi,

2015), and scholars have called for more studies to identify its boundary conditions in different cultural contexts

(Erez & Nouri, 2010; Friedman, 2009). Practically, an investigation of the PFP–creativity link offers practitioners

new insights into how to successfully implement the PFP system in the Chinese context.

*Correspondence to: Yong Zhang, College of Economics and Management, Huazhong Agricultural University, Wuhan, China, 430070.

E-mail: yzhang@mail.hzau.edu.cn

Lirong Long , School of Manageme nt, Huazhong University of Science & Technology, Wuhan, China, 430074.

E-mail: lrlong@mail.hust.edu.cn

Copyright © 2015 John Wiley & Sons, Ltd.

Received 16 February 2014

Revised 14 March 2015, Accepted 28 March 2015

Journal of Organizational Behavior, J. Organiz. Behav. 36, 698–719 (2015)

Published online 29 April 2015 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/job.2012

Special Issue Article

Specifically, the results of empirical studies on the effects of extrinsic reward on individual creativity are mixed.

Some studies have demonstrated that extrinsic reward is positively related to creativity (e.g., Eisenberger & Armeli,

1997; Eisenberger, Armeli, & Pretz, 1998; Eisenberger & Aselage, 2009; Eisenberger & Rhoades, 2001), whereas

others have shown negative associations (e.g., Amabile, 1982; Amabile, Hennessey, & Grossman, 1986). To address

these conflicting results, researchers have begun to identify the boundary conditions of the reward–creativity link,

such as work contexts (Byron & Khazanchi, 2012) and individual traits (Ederer & Manso, 2013; Malik et al.,

2015). The key argument is that extrinsic reward may enhance creativity under the condition where an individual’s

intrinsic motivation can be induced by the reward (Baer et al., 2003; Eisenberger & Aselage, 2009; Eisenberger &

Rhoades, 2001). Given that people in countries with a collectivist culture such as China tend to value intrinsic

motivation less than people from individualistic countries do (Huang & Van de Vliert, 2003), it is essential to

explore the situational and culture-specific conditions that may allow PFP, a type of extrinsic reward, to induce

intrinsic motivation and creativity (Zhou & Su, 2010).

Drawing from cognitive evaluation theory (Deci & Ryan, 1985)and research on effects of bundling of HRpractices

(Klaas, Semadeni, Klimchak, & Ward, 2012; Macky & Boxall, 2007), we cast guanxi human resource management

practices (guanxi HRM practices; Chen,Chen, & Xin, 2004) as a salient Chineseindigenous variable that may regulate

the influence of PFPon Chinese employees’intrinsic motivation and creativity.In general, guanxi is a specific personal

connection between two or more parties in the Chinese context that shapes management practices and interpersonal

interactions (Chen & Chen, 2012, 2004; Tsui & Farh, 1997). Guanxi HRM practice refers to those HRM practices

(e.g., staffing,promotion, and performance appraisal)that are influenced and dri ven by interpersonal connection s rather

than rules and regulations. In this study,we focused on guanxi HRM practices fortwo reasons. First, guanxi is a critical

Chinese socio-cultural concept(Chen & Chen, 2009). It is so pervasive that everyaspect of social and organizationallife

involvesguanxi (Park & Luo, 2001), includingHRM (Han & Altman, 2009). Second,PFP is an HRM practice imported

from the West (Du & Choi, 2010) and focuses on impersonalization rather than personal connection. We believe that

guanxi practices may be a salient inhibiting factor in a successful implementation offormal HRM practices (e.g., PFP)

in the Chinese context, because guanxipractices are inconsistent with theequity principle of PFP. Therefore,we expect

that guanxiHRM practices may moderatethe effect of PFP on Chineseemployees’intrinsicmotivation and creativity.To

further qualify ourkey logic, we propose that guanxi HRM practices may reduce employees’trust in top management,

which in turn moderates theinfluence of PFP on intrinsic motivation andcreativity.

Our empiricalfindings contributeto PFP and creativity literaturesin several ways. First, the impressiveachievement of

China’seconomic reform has demonstratedthe effectiveness of PFP inenhancing productivity. However,we know little

about whetherPFP would improve employee creativity and innovation,which are the key determinantsof the success of

firms in the future.Unfortunately, the extant literature offers mixedfindings regarding the impact of PFP on employees’

intrinsic motivation and creativity. Thus, ourstudy contributes to this literature by developinga contextualized theore-

tical model to predictthe implications of PFP for intrinsic motivation and creativity in the Chinese context.

Second, the recent development of cognitive evaluation theory (Deci, Koestner, & Ryan, 1999; Eisenberger & Aselage,

2009; Gagné & Deci, 2005; Ryan & Deci, 2000) suggests that employees do not simply react to individual PFP incentives.

Rather, their positive responses to PFP depend on the overall assessment of equity of the entire organizational reward

system (Byron & Khazanchi, 2012; Nyberg, Pieper, & Trevor, in press). In line with this logic, we propose that guanxi

HRM practices may counteract the equity principle of PFP and thus may undermine the positive effect of PFP on intrinsic

motivation and creativity. We advance knowledge by testing the idea that the consistency across various HR practices is

crucial in ensuring positive reactions from employees (cf. Klaas et al., 2012; Nyberg et al., in press).

Third, we also add to the guanxi literature by investigating its detrimental effect on management practices in con-

temporary Chinese organizations. We contend that employees’perceptions of guanxi HRM practices may not only

reduce employees’trust in their management but also hinder the positive influence of PFP on employees’intrinsic

motivation and creativity.

Lastly, our studies may also have implications for broader HR practices in transition economies within China.

PFP was originally developed by the reformists to boost productivity in Chinese firms and improve pay equity by

reducing the influence of traditional practices such as guanxi. We attempt to demonstrate that the most effective

PFP, GUANXI HRM PRACTICE, AND CREATIVITY 699

Copyright © 2015 John Wiley & Sons, Ltd. J. Organiz. Behav. 36, 698–719 (2015)

DOI: 10.1002/job