The effect of performance-based pay for R&D-employees is subject to intense debate in both research and practice. While some see it as a useful mechanism for increasing effort, others point to potential negative consequences for employees’ creativity and openness. In their recent publication in “Accounting, Organizations and Society”, Gerhard Speckbacher and Markus Wabnegg build on survey and patent data to show that incentives can indeed be successfully applied in research and development. They suggest that performance-based pay should contain long-term, group-based as well as nonmonetary components, and that firms also need to consider how they frame such incentives. Moreover, the prospect of future interesting projects, a flexible work environment and personnel development opportunities represent important implicit incentives that motivate employees to think out-of-the-box and search for more distant knowledge and views. Taken together, the study thus provides evidence that the right combination of explicit and implicit incentives makes it more likely that R&D-employees generate higher innovation performance

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