Understanding the Impact of Rewards on Employees’ Creativity and Innovation: a Literature Review Study

Sammanfattning: Purpose: The purpose of this master’s thesis is to study how organizational rewards; intrinsic rewards and extrinsic monetary and non-monetary rewards, affect employees’ creativity and innovation within an organizational environment, and to propose a new categorization of organizational rewards. Methodology: A literature review of selected peer-reviewed studies from different countries and industries. Findings: The results of this study support the following notions; (1) intrinsic rewards support employees’ creativity and innovation through their positive impact on intrinsic motivation; (2) extrinsic non-monetary rewards support employees’ creativity and innovation ; (3) extrinsic monetary rewards can support or hinder employees’ creativity and innovation depending on external organizational factors. This study suggests a new model which categorizes organizational rewards into two main groups; monetary and non-monetary instead of extrinsic and intrinsic, and the non-monetary one into intrinsic and extrinsic while the monetary group includes only extrinsic rewards.