Why are financial incentive effects unreliable? An extension of self-determination theory

This paper extends self-determination theory (SDT) to investigate the unreliability of financial incentives as motivators. The proposed model predicts that core financial need beliefs influence financial values, which in turn influence "hedonic" utility, i.e., happiness. Four financial need belief constructs are proposed and measured: (1) financial self-efficacy, (2) financial autonomy, (3) financial community-trust, and (4) financial community-support. In addition, our extension of SDT predicts that financial values, i.e., altruistic versus materialistic, differentially impact hedonic utility; accordingly, we measure the extent to which individuals value financial rewards for altruistic versus materialistic reasons. The results largely support the extension of SDT to the financial domain. Specifically: (1) financial values partially mediate the effects of financial need beliefs on hedonic utility, and (2) financial altruism positively, and financial materialism negatively, predicts hedonic utility. We conclude by noting the limitations of our research designs and the potential for SDT, as extended to measured-not assumed-financial need beliefs, financial values, and hedonic utility, to explain the unreliability of financial incentives in motivating behavior.