Time to Stop? An Empirical Investigation on the Consequences of Canceling Monetary Incentives on a Digital Platform

Digital platforms commonly use monetary incentives to motivate users to perform specific tasks. Extant studies have shown the effects of introducing such monetary rewards on the outcomes of interest (e.g., participation and performance) on public platforms. However, little is known about the impact of canceling rewards (i.e., whether it simply reverses the effect of their introduction), and particularly less attention is paid to corporate platforms. Our study examines the impact of canceling monetary incentives using quasi-natural experiments on a corporate platform. Similar to prior studies focusing on public platforms, we find that introducing quantity-based monetary incentives increases participation (contribution quantity), but has no significant effect on performance (contribution quality). Yet, in contrast, our main empirical analysis reveals that canceling monetary incentives is not simply the reverse process of their introduction. In particular, compared with the increase in participation when monetary rewards were initially introduced, the cancellation of these rewards leads to a sharper decrease in participation. This suggests that canceling rewards has a net negative impact on participation. In addition, canceling monetary rewards also causes a significant decline in performance, which indicates that the effects of canceling and introducing rewards on performance are not simply the opposite of each other. Furthermore, we examine the heterogeneous responses of individuals with different self-motivation types and working competency levels to monetary incentives, highlighting the “asymmetry” between canceling and introducing incentives. We also discuss the similarities and differences between corporate and public platforms regarding the impact of monetary incentives. Our results provide important practical implications for enterprise information systems and general information systems regarding their design of platform strategies.

History: Yong Tan, Senior Editor; Wenjing Duan, Associate Editor.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.0017.