The impact of performance-based rewards and developmental performance appraisal on innovation: the mediating role of innovative work behaviour

Abstract

PurposeThe aim of this paper is to study and empirically test the relationship between employees' perceptions of the two motivation-enhancing human resource management (HRM) practices of reward and performance appraisal and both incremental and radical innovation. The paper examines whether innovative work behaviour (IWB) mediates the hypothesised relationship.Design/methodology/approachData were collected from 313 unit managers in manufacturing, pharmaceutical and technology companies in Jordan. Structural equation modelling (SEM) using AMOS v27 was employed to analyse the data and test the hypotheses.FindingsThe study finds that employees perceive rewards to be significant and to directly influence incremental and radical innovation. Additionally, employees perceive that performance appraisal to be significant for incremental innovation. The study also finds that IWB mediates the relationship between rewards, performance appraisal and incremental and radical innovation. No support was found for the impact of performance appraisal on radical innovation.Originality/valueDistinctively, this paper considers both incremental and radical innovation in studying the link between HRM practices and innovation. It also takes an intra-organisational perspective by considering employees' perceptions of rewards and performance in fostering innovation. Additionally, it assesses the impact of IWB in mediating the relationship between rewards, performance appraisal and innovation. IWB is rarely empirically studied in the HRM–innovation link specifically when linked with radical and incremental innovation.