Introduction Effects of an Information Sharing System on Employee Creativity, Engagement, and Performance

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1. Introduction

Service and retail organizations in diverse markets often need to find ways to understand and satisfy customer needs on a timely basis. To do so, these organizations tend to allocate greater decision authority to their frontline employees, who have better access to relevant local information than headquarters, so that they can gather information about customer needs and generate creative and timely solutions to fulfill those needs Baiman, Larcker, and Rajan [1995], Fladmoe-Lindquist and Jacque [1995], Aghion and Tirole [1997], Dessein [2002], Campbell, Datar, and Sandino [2009]. However, despite the perceived value in employees’ local creativity and the formally granted permission to experiment, not all employees use discretion to generate creative ideas or solutions Campbell [2012]. Prior studies in economics, accounting, and management have examined several control systems that facilitate or inhibit such local creative experimentation. Collectively, these studies highlight the importance of providing long-term incentives, tolerating short-term failures, and selecting the “right” type of employees Holthausen, Larcker, and Sloan [1995], Campbell [2012], Manso [2012]. However, these studies have mostly overlooked the role information sharing plays in ongoing local experimentation and, more specifically, in employees’ creative efforts. In this study, we exogenously increased access to information on peers’ creative work through a field experiment that introduced an information sharing system recording employees’ creative work hereafter ISSC. Our goal was to examine the impact of introducing an ISSC on the quality of creative work, job engagement, and financial performance. 1 1 For the purposes of this study, we assess the quality of creative work based on Hennessey and Amabile’s [2009] definition of what creative work should involve; in their words, “creativity involves the development of a novel product, idea, or problem solution that is of value to the individual andor the larger social group.” p. 572 3 There are various economic and behavioral forces that make it unclear whether an ISSC will, in practice, promote experimentation and yield positive performance outcomes. This kind of system could yield significant benefits by a providing employees with greater access to information, enhancing their creative abilities through a broader and more diverse pool of ideas than their initial set andor b affecting the employees’ motivation and engagement by increasing accountability for the quality of their creative work. Yet, the system could also impose significant costs if it unintentionally leads employees to reduce their experimentation by conforming to a common, unimaginative norm. Employees could do so to minimize risk if they fear that novel work would be judged negatively by their peers, if they free-ride on their peers by copying their creative work, or if they felt threatened that their peers would free-ride on their own creative work Arrow [1962]. We partnered with a mobile phone retail company hereafter MPR differentiating on customer service and operating 42 company-owned stores to develop a field experiment testing the effects of implementing an ISSC. Like many other customer-focused retailers, idea generation based on the local environment is an integral part of the work at MPR’s stores. MPR operates in an emerging market where customization of the sales process is essential to compete with local mom and pop shops. The salespeople at the retail stores create hand-made sales posters to attract local customers’ attention and to explain the store’s promotion plans, which are updated by the retailer andor its suppliers on a weekly basis. Figure 1 presents examples of the posters salespeople create and display at their stores. 2 2 As Figure 1 shows, the quality of these posters in terms of how clearly they communicate the essence of the deal and how visually appealing they are varies significantly across different stores. 4 MPR collaborated with us on a field experiment in which the company pilot-tested an ISSC a web app showcasing the sales posters developed by the salespeople at the treated stores i.e., the stores where the system was tested. The site was accessible via mobile phone by the store managers and the salespeople working at the treated stores, who could both upload posters and browse other people’s posters by brand or by favorites. 3 Although the salespeople produced these posters on an ongoing basis, prior to this experiment, the sales posters had never been shared across stores. In the field experiment, we randomly assigned stores to a “treatment” group, where we introduced the ISSC, and to a “control” group. We examined the effects of the ISSC on three outcomes of interest: quality of creative work, job engagement, and financial performance. Following prior creativity studies e.g. Amabile [1988], we measured the first outcome based on two dimensions: the value of the creative work measured on a 1-5 scale capturing the poster’s ability to communicate the products and deals offered and the novelty of the creative work measured on a 1-5 scale, capturing the posters’ ability to distinctively grab the attention of customers. We used the brand promoter’s weekly attendance as a proxy for job engagement, and the store-brand weekly sales to measure financial performance. Our findings suggest that, on average, the ISSC did not have a statistically significant impact on any of these outcomes. 4 However, further tests uncover circumstances where the system was associated with a number of favorable outcomes. Our analyses show that the ISSC had a positive effect on the quality of creative work and to a more limited extent, the stores’ financial performance and attendance when it was more frequently accessed, even after 3 In the field experiment, the exposure of the posters on the website was mandatory. Store managers and managers at the headquarters followed up with all the salespeople in the treatment stores during the monthly “uploading” period to make sure that every salesperson’s poster was in the system. 4 Based on our power analyses, we are 80 confident that, on average, the ISSC did not change the quality of creative work measures by 0.18 points or more on a 1-5 point scale, attendance by 0.23 days or more each week, or sales by 13 or more. 5 controlling for the types of stores more prone to accessing the system. In stores where the system was used most often, the effect of the system was associated with an increase in the value novelty of creative work of 0.40 0.23 points on a 1-5 point scale. We also explore three conditions that could have affected the impact of the ISSC: the users’ natural exposure to others’ ideas, the ex-ante creative talent of the individuals, and the type of market served mainstream vs. divergent. On the first condition, we find that the ISSC was associated with greater quality of creative work in stores with fewer same-company nearby stores i.e., an increase of 0.38 points in the value of creative work on a 1- 5 point scale and 0.29 points in the novelty of creative work on a 1 - 5 point scale. This suggests that the system was more beneficial where salespeople were naturally less exposed to others’ creative work. Interestingly, the system was also associated with a 0.30 decrease in the novelty of creative work on a 1-5 scale in stores with more same-company nearby stores, suggesting that salespeople at those stores may have been more concerned about their peers’ free-riding. On the second condition, we find that the system led to better financial results when salespeople had lower creative talent than when they had higher creative talent prior to introducing the system. A 25 increase in sales following the adoption of the ISSC was observed for store-brands with promoters whose ex-ante creativity was below the median, suggesting that they may have had more to learn from others’ work. Finally, on the third condition we find that the ISSC was associated with a 0.28 point increase in the value of creative work on a 1-5 scale and a 0.24 days increase in the weekly attendance of salespeople working for stores located in “divergent” 6 markets, 5 consistent with the idea that stores requiring greater customization could benefit more from the system. In summary, although the introduction of the ISSC at our site did not strongly lead to significant improvement in average outcomes, the system was associated with improvement in the quality of creative output when accessed frequently andor where information was most needed i.e., where the salespeople were less exposed to others’ ideas or where they needed to tailor their efforts to specific customers’ needs. Furthermore, the system was associated with increases in financial performance for store-brands whose promoters were initially less creative and to greater job engagement in divergent markets where customers demanded greater customization. Our study contributes to two streams of literature. First, we contribute to the accounting literature that examines the effects of management control systems on the quality and performance consequences of employees’ creative work. This literature has largely focused on examining the extent to which executive and employee incentive pay can enhance creativity and innovation. For instance, Holthausen, Larcker, and Sloan [1995] find modest evidence that business units where executive pay was tied to long-term performance were linked to greater future innovation. Prior laboratory experiments rewarding subjects for either the quantity or the creativity-weighted quantity of their creative output show that the former type of rewards leads to greater creativity- weighted productivity than the latter Kachelmeier, Reichert, and Williamson [2008], Kachelmeier and Williamson [2010]. In a similar experiment, Chen, Williamson, and Zhou [2012] find that, when rewarding individuals for the creativity of their output, group-based 5 The manager identified as “divergent stores” those where the salespeople had to customize the service more due to distinctive customer needs e.g. stores where customers spoke other languages, communities were distinctive in a way that distinguished them from the chain’s mainstream stores, andor customers were significantly more demanding, typically in higher income areas. 7 tournament incentives are more effective at promoting group creativity than both individual- based tournament incentives and group-based piece-rate incentives. In contrast with the focus on incentive systems in these prior studies, our study, to the best of our knowledge, is the first to focus on a management control system that gives employees access to information—specifically, an ISSC—that could not only affect the employees’ motivation to be creative and engage more closely with their jobs but also enhance the knowledge and skills needed to be creative in their work. Our study finds that these positive effects materialize only when users engage with the system, andor when users have greater potential to learn from the information in the system given either their lack of creativity or exposure to others’ creative work limited supply of ideas andor their need to customize their creative work greater demand for ideas. Second, this study contributes to the literature in accounting and management that studies the effect of increased access to information on decision outcomes and new knowledge creation. Prior studies in accounting have found that the implementation of information sharing systems in organizations is associated with improvements in decision quality and financial performance Banker, Chang, and Kao [2002], Campbell, Erkens, and Loumioti [2014]. Moreover, organizational knowledge creation theory suggests that interactions among diverse practitioners lead to innovation Nonaka [1994], Nonaka and Krough [2009]. In two laboratory experiments, Dennis and Valacich [1993] and Girotra, Terwisch, and Ulrich [2010] apply this theory to test the effects of information sharing systems on brainstorming sessions. Their findings reveal that, by enabling subjects to work individually before exposing their ideas to others in brainstorming sessions, the use of information sharing systems contributes to increasing the number and quality of ideas generated as well as the participants’ satisfaction with the group ideation process. To our knowledge, our study is the first to examine whether the use of ISSC can enhance the creative 8 work of individuals as well as their resulting job engagement and performance. And it is also the first to examine these effects on individuals as they perform day-to-day creative tasks in the context of their organizations. Our results suggest that an ISSC can affect creativity and engagement a when users engage with the systems on a regular basis, a requirement that may be harder to attain when individuals are performing their daily jobs than when, as in prior experiments, they are explicitly asked to use a system to complete a task, andor b when individuals have greater need to learn about and implement creative ideas. Beyond contributing to the academic literature, our study aims to shed light on a topic that has gained significant attention from the business community in recent years, with companies increasingly seeking ways to leverage the use of information networks within their firms to increase employee interactions and exchanges of ideas. The rest of this proposal is organized as follows. Section 2 presents our hypothesis development, Section 3 describes our research method and setting, Section 4 provides a detailed description of our research design, presents our analyses, and discusses our findings. Section 5 concludes.

2. Related Literature and Hypothesis Development