An Experimental Examination of Information Technology and Compensation Structure Complementarities in an Expert System Context

Abstract

This paper investigates the interaction between compensation structures and expert system technology. One hundred twenty-two participants selected a contract (fixed pay or performance-contingent incentives) and performed one of two risk-rating tasks either in the presence or absence of an externally valid expert system. For both tasks, the expert system increased decision accuracy only for participants selecting performance-contingent incentives, and these incentives increased decision accuracy only in the presence of the expert system, consistent with a complementary interaction. The results support the view that expert system technology changes task requirements and, hence, may also change self-selection and effort compensation contracting effects. The results provide evidence about the interdependence of organization, system, and individual factors in determining task performance, and suggest that organizational performance may be improved through the joint implementation of expert systems and performance-contingent incentives.

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