Received: 12 June 2020

| Accepted: 2 August 2021

DOI: 10.1111/jpim.12600

ORIGINAL ARTICLE

The ambivalent role of monetary sales incentives in service

innovation selling

Sascha Alavi1 | Eva Böhm2 | Johannes Habel3 | Jan Wieseke1 |

Christian Schmitz1 | Felix Brüggemann4

1
Sales Management Department,
Ruhr-­University of Bochum, Bochum, Abstract
Germany Complex service innovations constitute a cornerstone in the strategy of numer-
2
Technical University of Dortmund, ous industrial companies. The industrial sales force assumes an important role
Dortmund, Germany
3
in the selling of these complex service innovations. For firms a key challenge in
C.T. Bauer College of Business,
University of Houston, Houston, Texas, this respect resides in ensuring the sales force's motivation for the selling of such
USA innovations and effectively solving customers’ business problems. Past research
4
jetlite GmbH, Hamburg, Germany frequently discussed monetary sales incentives as an effective tool to reinforce
desired employee behaviors, but, to date, the discussion has failed to produce
Correspondence
Sascha Alavi, Sales Management conclusive guidance for practitioners as to whether monetary sales incentives in
Department, Ruhr-­University of fact can facilitate selling of complex service innovations. To clarify the effects of
Bochum, Universitätsstraße 150, 44780
Bochum, Germany.
monetary sales incentives in this respect, we draw on self-­focus theory to dis-
Email: sascha.alavi@rub.de entangle how complex service innovation selling is shaped by the interplay of
Funding information
salesperson service incentives (i.e., the extent to which variable compensation
We hereby declare that we have depends on service turnover) and salesperson share of variable compensation
received no funding for this research. (i.e., the percentage of compensation that depends on performance). To test these
interactive effects, we use a multiple-­source data set including 294 salespeople,
and match objective firm data. The results reveal that when service incentives
are high, the share of variable compensation exhibits an inverse u-­shaped effect
on a salesperson's problem-­solving behavior, which is an important predictor of
innovative service selling success. In addition, the share of variable compensa-
tion increases work effort, which in turn drives innovative service selling success.
These findings shed light on the intricate “human”, employee-­related side of ser-
vice innovation management and provide actionable implications for managers
how to increase their firms’ innovative service selling success.

KEYWORDS
innovative services, problem-­solving, sales incentives, sales management

This is an open access article under the terms of the Creat​ive Commo​ns Attri​butio​n-­NonCo​mmerc​ial-­NoDerivs License, which permits use and distribution in any
medium, provided the original work is properly cited, the use is non-­commercial and no modifications or adaptations are made.
© 2021 The Authors. Journal of Product Innovation Management published by Wiley Periodicals LLC on behalf of Product Development & Management Association

J Prod Innov Manag. 2021;00:1–19.  wileyonlinelibrary.com/journal/jpim   | 1

2 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
1 | I N T RO DU CT ION
Complex service innovations constitute a cornerstone
in the competitive strategy of numerous industrial com-
panies (Kuester et al., 2013; Troilo et al., 2017; Ulaga &
Reinartz, 2011). Complex service innovations combine
products and customized services with software and new
technologies into new, value-­creating offerings, which
had previously not been available to customers (Storey
et al., 2016). In a recent industry study of senior execu-
tives from manufacturing companies, a vast majority of
79% of the 577 surveyed managers indicated that such in-
novations constitute an essential facet of their corporate
strategy (Schmitz et al., 2018). For supplying companies
and customers, these service innovations are innovative in
the sense that they often rest upon new, cutting-­edge tech-
nologies and that they can unlock additional and novel
value potential for customers (Barrett et al., 2015; Troilo
et al., 2017). But they likewise entail the need for a sup-
plying company's close integration in customers’ business
processes (Bond et al., 2020), creating new, heightened or-
ganizational complexities for suppliers of complex service
innovations (Kuester et al., 2013).
For instance, a complex service innovation by IBM for
hospitals is a digitalization project in which IBM plans,
builds, operates, and maintains a hospital's entire IT in-
frastructure (Barrett et al., 2015). That is, in addition to
providing the basic IT hardware, IBM consults on how to
set up different systems, provides or creates software for
these systems, implements AI technologies to automate
and optimize the systems, and even operates these systems
through IBM personnel. Another example of complex ser-
vice innovations in the construction industry pertains to
construction site management. Suppliers such as Bechtel
Group or Fluor Corporation take over for their customers
the entire planning, engineering, and construction pro-
cesses, provide the necessary construction equipment and
personnel, and use construction laser scanning technol-
ogy to monitor and optimize construction progress.
Prior literature identified a range of success factors
for service innovations pertaining to the organization
and management of firm processes (for a meta-­analysis
of relevant success factors see Storey et al., 2016). One of
these success factors is the industrial sales force as essen-
tial boundary spanners (Atuahene-­Gima, 1997, 1998; Fu
et al., 2008, 2009, 2010; Hultink & Atuahene-­Gima, 2000),
because complex service innovations require personal
contact, close coordination, and collaboration between
supplier and customers (Panagopoulos et al., 2017). But
the complex, novel nature of service innovations poses
new major challenges to salespeople. Salespeople now
need to ensure the aforementioned integration of the
complex service innovation within customers’ business
Practitioner points
• Managers need to be aware that monetary sales
incentives systems require careful design to
prevent them from unleashing harmful effects
on salespeople’s problem-­solving behavior in
innovative service selling.
• Seeing that monetary sales incentives may in-
duce trade-­offs between salespeople’s work ef-
fort and problem-­solving, managers need to
decide how much additional sales effort they
are willing to “buy” at the cost of problem-­
solving behavior.
• With rising importance of service innovations
in their business models, managers should
more strongly build their variable compensa-
tion on innovative service selling performance
while at the same time choose a moderate share
of variable compensation.
processes—­a highly complex problem, which salespeople
needed to face to a much smaller extent in conventional
business models (Salonen et al., 2021). This integration
requires salespeople’s effective problem-­solving over a
prolonged time span of the joint collaboration process: for
example, in deeply analyzing the customers’ firm, market,
and business model and the job to be done (Christensen
et al., 2007; Mullins et al., 2020), identifying and crafting
adequate offerings to get the job done (Böhm et al., 2020;
Stock et al., 2017), as well as coordinating the service
implementation and maintenance (Panagopoulos et al.,
2017). Considering the example of IBM, while salespeo-
ple’s main responsibility previously concerned concluding
business transactions on IT hardware with the hospitals,
with complex service innovations salespeople need to co-­
create more holistic IT solutions with the hospitals and
guide the hospitals through the implementation process.
Practitioners and researchers report that salespeople
may lack the necessary motivation to put effort into sell-
ing complex service innovations and adapt their familiar
way of selling (Ulaga & Reinartz, 2011). In turn, firms
constantly seek ways to enhance salespeople’s motivation
with respect to service innovations, but no simple sales
management practice exists for them to do so. One instru-
ment that is frequently mentioned as an effective tool to
reinforce desired employee behaviors are monetary sales
incentives (e.g., Ramaswami & Singh, 2003; Rouziès et al.,
2009). However, to date, the discussion has failed to pro-
duce conclusive guidance for practitioners as to whether
monetary sales incentives can facilitate selling of complex
service innovations. While a vast body of research found
ALAVI et al.
that monetary sales incentives increase performance
through their beneficial effects on salespeople’s motiva-
tion and effort (e.g., Cameron et al., 2001; Chung et al.,
2013; Lazear, 2000), a nascent stream of research indicates
that the increased complexity of service innovations ren-
ders monetary sales incentives ineffective or even counter-­
productive (e.g., Rouziès et al., 2009; Zoltners et al., 2013).
In view of the growing practical relevance of this topic
and the salient lack of theoretical clarity, the present study
aims to empirically examine the effects of monetary sales
incentives when firms aim to provide complex service inno-
vations to customers. For the basic design of their incentive
system, sales managers need to decide on the performance
measure on which to incentivize, which we refer to as the
incentive direction, and the level of incentives granted to
salespeople, which we refer to as the incentive intensity. Our
study seeks to examine the effects of salesperson incen-
tive direction and salesperson incentive intensity on their
innovative service selling success. Regarding salesperson
incentive direction, we focus on salesperson service incen-
tives, which we define as the extent to which their variable
compensation is based on service turnover. With respect
to incentive intensity, we examine salespersons’ share of
variable compensation, which we conceive as the contrac-
tually agreed upon percentage of their compensation that
depends on their performance.
A key asset of our research is that we test our hypothe-
ses by using a matched multiple-­source data set, as we em-
ploy both objective firm data comprising project records
and surveys of salespeople. As the study context, we use a
multi-­national construction supplier network comprising
over 60 stand-­alone sales organizations. We employ data
from 294 salespeople and the participating employees
originate from 55 different country units, ensuring a high
level of generalizability and minimizing the influence of
cultural idiosyncrasies.
Our study yields findings, which extend and enrich
prior research on innovation selling and monetary sales
incentives. That is, we find that the share of variable com-
pensation exhibits an inverse u-­shaped relationship with
problem-­solving behavior. Initially, increases in variable
compensation help to enhance problem-­solving behav-
ior, but—­above a certain level—­start to erode problem-­
solving behavior and service innovation success; an effect
that is particularly pronounced when a salesperson's vari-
able compensation depends more on their service selling
performance. While past research on innovation selling
examined effects of monetary incentives on innovation
selling success, indicating positive relationships (Beuk
et al., 2014; Hohenberg & Homburg, 2016; Homburg
et al., 2019), these works did not explore potential nonlin-
ear effects of different incentive components and had not
focused on complex service innovations. We complement
   | 3
this research by showing that for complex service innova-
tions incentive intensity can exhibit an inverse u-­shaped
effect on salespeople’s problem-­solving as one important
driver of innovation selling success.
More specifically, we disentangle the effects of differ-
ent incentive parameters, enabling concrete suggestions
for the design of monetary sales incentives when firms
adopt complex service innovation-­oriented strategies. In
particular, we show that innovative service selling success
is highest for medium levels of variable compensation (i.e.,
incentive intensity) and high orientation of salespeople’s
variable compensation toward service innovations (i.e.,
incentive direction). These insights augment previous re-
search on monetary sales incentives in innovation selling
that has heretofore focused on single incentive parameters
and almost exclusively conveys linear and positive conse-
quences of monetary sales incentives.
For practitioners, our findings have actionable implica-
tions. First, managers need to understand that monetary
incentives positively influence salespeople’s work effort
but concurrently unleash potentially harmful effects on
their problem-­solving behavior in innovative service sell-
ing. In other words, beyond a certain level of monetary
incentives, managers need to determine how much work
effort they are willing to “buy” at the cost of salespeople’s
problem-­solving. Second, our results can help managers
decide on the right direction and intensity of monetary
sales incentives in the context of service innovations.
Specifically, with increasing importance of service inno-
vations, managers are well-­advised to more strongly build
their variable compensation on innovative service selling
performance while at the same time choose a moderate
share of variable compensation.
2 | LITERATURE REV IEW
In the following, we review the two major research areas
of our study, which concern (1) the role of sales in innova-
tion selling and (2) the performance effects of monetary
sales incentives. Our research bridges the areas of inno-
vation management and sales management, resolving the
question of how firms should configure sales force incen-
tive systems to promote problem-­solving behavior and
the selling of complex service innovations in industrial
contexts.
2.1 | The role of sales in innovation
selling
In what follows, we provide an overview of the literature
that yields insights into the role of the sales force for selling
4 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
innovations. To date, research in this area focuses on the
adoption of new goods (e.g., Ahearne et al., 2010; Beuk
et al., 2014; Fu et al., 2010) or new brands (e.g., Wieseke
et al., 2008) or does not specify the type of innovation that
has been sold (e.g. Johnson & Sohi, 2017); service inno-
vations are not the center of investigation in any of the
studies.
In general, literature on innovation selling agrees on
the critical role of sales force motivation for innovation
success (e.g., Atuahene-­Gima, 1998, 1997, Fu et al., 2008,
2009, 2010; Hultink & Atuahene-­Gima, 2000; Stock,
2015). As boundary spanners, salespeople assume an im-
portant role at the organizational frontline and are often
the primary customer contact point with the organization
(Rapp & Baker, 2017), making them pivotal for success-
fully bringing innovative goods and services to the market.
In particular, salespeople were found to have an effect on
customer's perception of new products (Ahearne et al.,
2010), salespeople’s performance in selling new products
(Atuahene-­Gima, 1998; Homburg et al., 2019), new prod-
uct sales (Ahearne et al., 2010), and growth rate of new
product sales (Fu et al., 2010).
Different salespeople’s behaviors have been identified
as critical for the performance of new products or services.
Most studies focus on the role of salespeople’s work effort
or selling intentions devoted to the new product for in-
novation success (Ahearne et al., 2010; Atuahene-­Gima,
1998; Fu et al., 2009, 2010; Hultink & Atuahene-­Gima,
2000). Yet, salespeople cannot only affect innovation
success by increasing efforts devoted to new work goals
(“working hard”), but also by adapting their behavior
to the new situation and using efforts more effectively
(“working smart,” Rapp et al., 2006). With one notable ex-
ception (Johnson & Sohi, 2017), empirical research does
not yet account for the role of “working smart” behaviors
in innovation selling.
Literature identifies different factors driving salespeo-
ple behaviors devoted to innovations. These factors pertain
to (1) salesperson characteristics, (2) task characteristics,
and (3) sales management characteristics. Several sales-
person characteristics were found to facilitate innovation
selling, among them self-­efficacy (Fu et al., 2009, 2010),
long-­term orientation (Beuk et al., 2014), learning orien-
tation (Homburg et al., 2019), and experience (Ahearne
et al., 2010). Innovation selling further depends on the
specific selling task, characterized by product innova-
tiveness (Fu et al., 2008), customer newness (Fu et al.,
2008), and expected customer demand (Wieseke et al.,
2008). Moreover, innovation selling requires the adapta-
tion of key sales management characteristics to mirror
new organizational goals (Hultink & Atuahene-­Gima,
2000; Rochford & Wotruba, 1996), including sales manag-
ers’ attitudes and leadership behaviors (Van der Borgh &
Schepers, 2014), training (Hohenberg & Homburg, 2016;
Johnson & Sohi, 2017), sales force control (Ahearne et al.,
2010; Atuahene-­Gima & Li, 2002; Homburg et al., 2019),
sales quotas (Fu et al., 2009), and monetary and non-­
monetary sales incentives (Beuk et al., 2014; Hohenberg
& Homburg, 2016; Homburg et al., 2019). With regard to
monetary sales incentives, prior research focuses on single
incentive parameters and reveals positive consequences
of incentive intensity (i.e., share of variable compensa-
tion; Hohenberg & Homburg, 2016) and incentive direc-
tion (i.e., orientation of the bonus to new product selling;
Homburg et al., 2019).
The proposition that monetary sales incentives posi-
tively influence performance has both supporters and op-
ponents (Jenkins et al., 1998). In the following, we examine
studies supporting both conceptions. First, studies sup-
porting monetary incentives as an effective sales-­steering
tool consider incentives to be a promoter of desired em-
ployee behaviors that increase performance (e.g., Baker,
1993; Baker et al., 1988; Eisenberger & Cameron, 1996;
Lazear, 2000). Typically, these studies deem monetary in-
centives to have favorable effects on salespeople’s motiva-
tion and work effort (Eisenberger & Cameron, 1996).
Second, some studies suggest an opposing view and
conceptually propose that monetary incentives can im-
pede sales performance (e.g., Ariely, Bracha, et al., 2009;
Ariely, Gneezy, et al., 2009; Condry, 1977; Habel et al.,
2021; Kohn, 1993; Rouziès et al., 2009; Zoltners et al.,
2013). One stream of research has unveiled that monetary
incentives distract salespeople from being creative, inno-
vative, and explorative and diminish their analytical skills
(e.g., Ariely, Bracha, et al., 2009; Condry, 1977; Kohn,
1993). These deficiencies result from the short-­term focus
that traditional sales incentive schemes entail (Zoltners
et al., 2013). Slater (1980, p. 127) summarizes that “get-
ting people to chase money produces nothing but people
chasing money.” Another stream of research argues that
monetary incentives result in a decline in intrinsic motiva-
tion (e.g., Ariely, Gneezy, et al., 2009; Deci & Ryan, 1985).
Third, over the past few decades, several valuable meta-­
analyses have reviewed this research field (e.g., Cameron
et al., 2001; Deci et al., 1999; Jenkins et al., 1998; Wiersma,
1992). Jenkins et al. (1998) analyze the relationship be-
tween monetary sales incentives and both performance
quality and quantity across 39 studies, and they find that
monetary incentives do not influence performance quality
(i.e., excellence of work results) but positively affect per-
formance quantity (i.e., amount of work results). Another
meta-­analysis of 128 studies by Deci et al. (1999) unveils
negative effects of monetary incentives on intrinsic moti-
vation. Finally, a meta-­analysis by Cameron et al. (2001)
finds that monetary incentives negatively affect intrinsic
motivation only for high-­interest tasks.
ALAVI et al.
Thus, it is unclear how monetary sales incentives
should be exactly designed and whether sales incentives
might have varying consequences for different salespeo-
ple behaviors relevant for selling service innovations. Our
study therefore investigates the effects of different incen-
tive parameters (i.e., incentive direction and incentive
intensity) on salespersons’ effort and problem-­solving be-
havior as well as their innovative service selling success.
3 | CO N C E PT UAL F R AM E WORK
We present our research framework in Figure 1. The
framework examines the interplay of two key elements
of sales incentive schemes that influence innovative ser-
vice selling success: incentive direction and incentive in-
tensity (Habel et al., 2021; Zenger & Marshall, 2000). The
framework incorporates paths between salesperson share
of variable compensation and innovative service selling
success via two mediators: salesperson problem-­solving
behavior and work effort. In what follows, we define all
constructs in the framework.
3.1 | Core constructs
Our first core construct, salesperson service incentives, in-
dicates the extent to which a salesperson's overall vari-
able compensation is subject to individual service selling
goals. In addition to the incentive direction, we consider
FIGURE 1 Conceptual framework of the ambivalent role of monetary sales incentives in service innovation selling
   | 5
a salesperson's compensation scheme to be characterized
by its incentive intensity. Therefore, in line with Rouziès
et al. (2009), the second core construct, salesperson share
of variable compensation, is the percentage share of a
salesperson's pay determined in the work contract that is
contingent on achievement rather than guaranteed (fixed
salary). Our third core construct is salesperson innovative
service selling success. We conceptualize innovative service
selling success as a salesperson's relative share of revenues
with complex, innovative services such as engineering,
consultation, and operation services in relation to compa-
nies’ average relative share of complex, innovative service
revenue (see the method section for details and robustness
checks on alternative operationalizations).
3.2 | Mediators
Previous research has shown that excessive focus on
monetary incentives affects salespeople’s selling behav-
ior, especially their problem-­solving behavior, and sales-
people’s motivation and thus work effort, which, in turn,
enhance their performance in service-­driven business
markets (Ariely, Bracha, et al., 2009; Ariely, Gneezy, et al.,
2009; Kohn, 1993; Zoltners et al., 2013). Therefore, we
include a salesperson's problem-­solving behavior and a
salesperson's work effort as mediators between monetary
sales incentives and innovative service selling success.
Salesperson problem-­solving behavior refers to the extent
to which a salesperson attempts to answer customer
6 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
issues by developing solutions that integrate the require-
ments of both the customer and the supplier (Ganesan,
1993; Stock, 2015), whereas salesperson work effort refers
to the amount of effort spent on work-­related tasks (Rapp
et al., 2006). The two constructs overlap with the well-­
established classification of working smart and working
hard (Rapp et al., 2006). Salesperson effort reflects the
concept of working hard (Rapp et al., 2006; Sujan, 1986).
In contrast, problem-­solving behavior is a smart behavior,
because it reflects the “direction of effort” (Sujan, 1986, p.
41) required to successfully sell complex service innova-
tions (Stock et al., 2017; Ulaga & Loveland, 2014).
4 | H Y P OT HE SE S DE VE LOPMENT
The use of sales incentives follows a simple logic: By
promising salespeople desirable rewards (e.g., monetary
bonuses) for the achievement of certain targets (e.g., a
quota on innovative product sales), salespeople become
increasingly motivated to reach these targets in order to
receive the rewards. They thus choose behaviors condu-
cive to reaching these targets (e.g., promoting innovative
products), which increases their performance.
In principle, one might assume this logic to also hold
for the selling of complex service innovations. That is, if a
company incentivizes salespeople on the selling of com-
plex service innovations, salespeople might focus on sell-
ing these innovations. As outlined in the introduction, to
succeed in this respect, salespeople need to engage in con-
siderably more problem-­solving compared to when selling
goods-­based innovations (Berry et al., 2006; Bond et al.,
2020). However, we expect sales incentives and problem-­
solving to be in conflict with each other under certain cir-
cumstances. We deduce this proposition from self-­focus
theory (e.g., Baumeister, 1984).
4.1 | The tenets of self-­focus theory
(SFT)
According to SFT (e.g., Baumeister, 1984), performance
pressure produces self-­focused attention, which, in turn, ex-
hibits a disruptive influence on performance (Baumeister,
1984). This phenomenon is also known as “choking under
pressure” (Baumeister, 1984; Beilock et al., 2004). SFT elu-
cidates psychological mechanisms that produce choking
under pressure and eventually result in detrimental per-
formance effects. In what follows, we present two of these
mechanisms that directly pertain to our study's context: (1)
shifting established procedures from “automatic” to “con-
trolled” and (2) narrowing the focus of attention by exces-
sively centering attention on oneself.
First, SFT proposes that with increasing importance of
high performance, individuals turn their attention inward
and start to overthink established procedures (Carver &
Scheier, 1978). In other words, performance pressure
makes individuals consciously think about the task at
hand, with the result that formerly intuitive and automated
mental processes become involuntarily controlled (Ariely,
Gneezy, et al., 2009). Previous studies have shown that
controlled and overlearned processes may be less effective
and more time consuming than intuitive and automated
ones (Hall et al., 2015). For example, Hall et al. (2015)
show that intuitive and spontaneous acting increases
the effectiveness of selling activities and reduces selling
time. Moreover, they find that intuition and spontaneity
allow better synthesis and selection from complex infor-
mation, which enhances performance. In turn, controlled
and overlearned processes may impede performance be-
cause salespeople get lost in details and disregard the focal
customer problem. Ariely, Gneezy, et al. (2009, p. 453)
summarize that in complex task environments “thinking
harder makes things worse.” A second reason for choking
under pressure concerns individuals’ focus of attention
(Baumeister, 1984). Specifically, pressure might induce an
excessive self-­focus. Especially in situations that involve
skilled performances, creativity, and open-­minded think-
ing, pressure is likely to diminish performance outcomes
because individuals focus on reducing failure rather than
on achieving success (Baer & Oldham, 2006; Baumeister,
1995; Ryari et al., 2021).
4.2 | The effect of sales incentives on
problem solving behavior
To effectively integrate a complex service innovation
within customers’ business processes, salespeople need to
devote considerable attention to their customers (Salonen
et al., 2021). That is, salespeople need to be able to un-
derstand the customers’ firm, market, and business model
and the job to be done (Christensen et al., 2007; Mullins
et al., 2020), identify adequate combinations of products
and services to get the job done (Böhm et al., 2020; Stock
et al., 2017), and coordinate the service implementation
and maintenance (Panagopoulos et al., 2017). For all of
these activities, salespeople require high levels of problem-­
solving behavior—­much more so than they would for
selling offerings other than complex service innovations
(Salonen et al., 2021).
To be successful in this respect, salespeople need to
avoid performance pressure. This is because as outlined
previously, performance pressure leads individuals to
overthink and to focus attention inward (Ariely, Gneezy,
et al., 2009; Baumeister, 1984). As a result, salespeople
ALAVI et al.
might lose sight of their customers (Harris et al., 2005),
making them more likely to misunderstand the job to be
done, craft an inadequate offering, or coordinate the ser-
vice implementation and maintenance ineffectively.
Importantly, one reason for such performance pressure
are exaggerated sales incentives (Eisenberger & Aselage,
2009; Habel et al., 2021). At a high share of variable com-
pensation, a further increase of the share progressively
induces performance pressure, particularly if salespeo-
ple expect their compensation to be at risk (Habel et al.,
2021). Building on these findings, we expect that the level
of service incentives determines whether a high share of
variable compensation induces salespeople to experience
performance pressure with regard to complex service in-
novation selling. If service incentives are high and thus
incentives strongly depend on the selling of services,
salespeople should perceive their compensation increas-
ingly at risk while selling complex service innovations.
They should thus perceive progressive performance pres-
sure in these situations (Habel et al., 2021), harming their
problem-­solving behavior. We thus propose:
H1 The relationship between salespeople’s share of vari-
able compensation and salespeople’s problem-­solving
behavior assumes an inverse u-­shape if service incen-
tives are strongly pronounced.
4.3 | The effect of problem-­solving
behavior on innovative service
selling success
When selling complex innovative services to custom-
ers, salespeople are constantly required to develop new
problem-­solving ideas and turn these ideas into action
(Stock, 2015; Stock et al., 2017). Seeing this relevance, we
expect problem-­solving behavior to constitute a key driver
of innovative service selling success. As outlined previ-
ously, our argument rests on the pronounced need for
salespeople to understand the customer's business model,
craft an adequate offering and ensure an effective imple-
mentation of the service innovation (Panagopoulos et al.,
2017). Salespeople's problem-­solving behavior ensures an
effective solution of customers’ business problems, ren-
dering it an essential success factor for complex service
innovation selling (Ulaga & Loveland, 2014). Solving cus-
tomers’ business problems through innovative services in
turn creates value for customers, which promotes close
relationships and fosters the selling of complex service in-
novations (Stock et al., 2017). Thus, we propose:
H2 Salespeople’s s problem-­solving behavior exhibits a
positive effect on innovative service selling success.
   | 7
4.4 | The effect of sales incentives on
innovative service selling success via
work effort
We also argue that salesperson share of variable compen-
sation increases salespeople’s work effort, which increases
their innovative service selling success (Ariely, Gneezy,
et al., 2009; Eisenberger & Cameron, 1996). Our ration-
ale for this proposition is that a high share of variable
compensation increases salespeople’s extrinsic motiva-
tion. Resulting from this extrinsic motivation, salespeo-
ple should be more likely to work harder in general,
translating to greater effort in selling goods and services.
Furthermore, previous research has shown that increased
work effort engenders positive performance outcomes
(Brown & Peterson, 1994).
In contrast to the effects involving problem-­solving be-
havior, we neither propose that the salesperson share of
variable compensation exerts a non-­linear effect on their
work effort nor that this effect is moderated by salesper-
son service incentives. SFT suggests that performance
pressure particularly impairs those behaviors that require
skilled performance, creativity, and open-­minded think-
ing (Baumeister, 1995). While these requirements cer-
tainly pertain to problem-­solving behavior, they may be
less needed to maintain one's work effort (Habel et al.,
2021). Thus, we propose:
H3 Salesperson share of variable compensation exhibits a
positive effect on salesperson work effort.
H4 Salesperson work effort exhibits a positive effect on
salesperson innovative service selling success.
5 | METHOD
5.1 | Sample
5.1.1 | Research context
As a study context, we chose a multi-­national con-
struction supplier that produces and sells products and
services to the construction industry. The corporation
employs more than 7000 people in over 60 stand-­alone
sales organizations. Complex service innovations are an
integral part of each salesperson's portfolio. The focal
company had adopted an innovative service-­based busi-
ness model. That is, the company had initiated a stra-
tegic transformation which entailed a focus on selling
complex service innovations, which exhibit a high level
of novelty in the industry and few competitors could
provide.
8 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
We chose this research context for three reasons: First,
according to Brady et al. (2005), the construction supplier
industry is incessantly moving toward service-­dominant
business models by adopting engineering and logistic
services in their offerings (Ghazimatin et al., 2021). The
construction supplier network that we worked with rep-
resents an exemplary environment for our study's context:
for decades, producing and selling equipment was the
core business within this supplier network. Since the late
1990s, this traditional manufacturing corporation had ad-
opted a business model relying on service innovations by
renting out product bundles that are complemented with
engineering, consultation and logistic services, which
have become a major source of income. As a measure of
business model innovation the company then introduced
novel, more complex services which were highly innova-
tive for the industry such as construction site planning,
engineering services, consultancy services, personnel ser-
vices, and data-­driven, IT-­related services such as work
tool monitoring or work tool management. For example,
the company is visualizing reality of construction sites via
the cutting-­edge technologies of laser scanning and drone
scanning. Within less than 30 min the entire site can be
scanned. The point cloud and rendering will be delivered
as 3D model. These data are used as a key basis for com-
plex planning and engineering services, closely integrated
in customers’ processes, and enable an accurate design
in line with jobsite conditions and avoid possible clashes
with existing or future structures. Correspondingly, previ-
ous research has identified the adoption of such complex,
innovative service-­centered business models as a change
process (Baines et al., 2009), wherein some salespeople
adopt the underlying concept faster than others. In the
construction supplier network, for our study, we examine
whether innovative service selling success differs con-
siderably across salespeople. We are therefore confident
that we study the true phenomenon of innovative service
selling and obtain a large enough sample for statistical
analyses.
Second, in the construction supplier network of our
study, incentive schemes are not standardized but de-
fined at each sales unit's own discretion. As a result, the
utilization of monetary incentives for sales steering var-
ies substantially among salespeople. Some salespeople are
predominantly driven by high shares of variable compen-
sation (25% receive a high share of variable compensa-
tion of more than 50%), others barely collect any variable
compensation (25% receive a low share of variable com-
pensation of less than 25%), and some salespeople are
in-­between (50% receive a medium share of variable com-
pensation of 25% to 50%). This is an important prerequisite
for our study, as it allows us to observe both extremes—­
that is, performance effects of high and low amounts of
monetary incentives. Third, the construction supplier in-
dustry constitutes not an idiosyncratic but rather a typical
B2B industry that shares similarities with common indus-
trial markets, such as mechanical engineering, automo-
tive supply, or chemicals (Cox & Ireland, 2002).
5.1.2 | Data source and data collection
We collected data from different sources in order to meas-
ure our study's variables at the appropriate levels and to
reduce common method variance (Podsakoff et al., 2003).
We obtained data from (1) salesperson surveys and (2) com-
pany records. First, we distributed an online-­questionnaire
to 511 salespeople in 55 sales units across all continents and
received 391 responses (a 77% response rate). Salespeople
provided information about their compensation schemes,
problem-­solving behavior, and work effort. Second, we ob-
tained objective firm data from company records. The con-
struction supplier network that we worked with granted us
access to their transactional sales data in the year in which
we administered our surveys and access to information on
non-­monetary incentives. Specifically, we collected the net
sales (i.e., after discount) for each product and service trans-
action and aggregated these data at both the project level
and the salesperson level. We matched the survey responses
of salespeople with the respective obtained objective firm
data through an employee code. After the matching proce-
dure, the final data set comprised 294 usable salesperson
data records for which objective company data were avail-
able. To verify whether structural differences exist between
the initial sample and the final sample, we compared both
samples. Results show that both samples do not exhibit
significant differences on key descriptive variables and
major variables in our model (age, experience, work effort,
problem-­solving, job satisfaction, variable compensation,
innovative service selling, service incentives; see table in
Web Appendix E).
Furthermore, in the data collection process we took
care to ensure the anonymity of the participants and se-
cure their data privacy. The cooperating company pro-
vided us with an anonymous employee code in the data,
which we could use to match the different data sources.
Thus, we did not have access at any time to any private
information and could not identify individual employees.
Moreover, we had signed an agreement of confidentiality
with the cooperating company. The average age of sales-
people was 39.5 years, with average industry experience
of 15.6 years. Additional tests revealed no significant dif-
ferences in responses between early and late respondents
on all major constructs and on key demographic variables.
Therefore, nonresponse bias is likely not a problem in our
data (Armstrong & Overton, 1977).
ALAVI et al.
5.2 | Measurement and reliability
diagnostics
Our study relies on established scales drawn from prior
studies as well as on novel constructs developed after
a thorough review of the related literature. Moreover,
the novel constructs were pre-­tested by five executives
with 17.3 years of industry experience on average as
well as five marketing researchers. The Appendix con-
tains a complete list of the measurement items used in
the study.
5.2.1 | Variable compensation
To measure the main predictor, salesperson share of
variable compensation, we asked salespeople to re-
port the percentage of their total remuneration that is
variable, employing a 21-­point sliding scale (anchored
on “0%” and “100%”). We thereby follow Oliver and
Anderson's (1994) approach of assessing the percentage
of variable salary in salesperson's compensation plan as
a self-­reported measure (see also Alavi et al., 2018). To
validate this measure, we employed company data on
the country-­level on the average salesperson share of
variable compensation per country unit as laid out in
the work contracts. Both measures strongly and signifi-
cantly correlate (r = 0.510, p < 0.000) lending support
to the content validity of salespeople’s reported share of
variable compensation.
5.2.2 | Innovative service selling success
Salespeople's innovative service selling success consti-
tutes the article's main dependent variable. This variable
reflects the extent to which salespeople close deals with
their customers on complex, innovative service innova-
tions. We obtained this variable from the company's data-
base and operationalize it as the relative share of annual
sales revenues achieved through selling innovative ser-
vices on the salesperson level. More precisely, we divide
salespeople’s share of revenue earned through the selling
of innovative services by the company's overall share of
innovative service revenues. However, to verify whether
our results are sensitive to the exact operationalization
of the innovative service selling success variable, in Web
Appendix A and B, we report results of our model employ-
ing different operationalizations. Using (a) salespeople’s
absolute revenue level with innovative services as well
as (b) omitting the overall company share of innovative
services as benchmark, does not meaningfully alter our
results.
   | 9
5.2.3 | Service incentives
The main moderating construct, salesperson service in-
centives, refers to the extent to which a salesperson's
overall variable compensation is contingent on his or her
individual service selling performance. The company did
not collect uniform data on this construct globally, and
therefore, it was recommended to base the analysis on
perceptual measures by using salespeople as informants.
Consequently, we asked salespeople to report the extent to
which their variable remuneration depended on turnover
with services. For this purpose, we used a self-­developed
single-­item seven-­point scale (anchored “no extent” and
“great extent”).
5.2.4 | Problem-­solving behavior and
work effort
To measure problem-­solving behavior, we adopted
Ganesan’s (1993) widely used scale. To measure salesper-
son work effort, we adopted an approach, which had been
employed in similar contexts and relies on quantifying the
level of work effort (e.g., Habel et al., 2021; Sauermann &
Cohen, 2010). That is, we asked salespeople to report how
many hours they work in a typical working week in total.
To verify that the absolute measure of working hours does
not unduly affect our results, we likewise assess a relative
measure of salespeople’s work effort, i.e., working hours
divided by the average working hours of sales reps. The
results of our model estimation remain robust with this
alternative operationalization (see Web Appendix C).
5.2.5 | Control variables
We included a broad set of theoretically grounded con-
trol variables in the model estimation to reduce the like-
lihood of endogeneity issue due to omitted variable bias
(Sande & Ghosh, 2018) and assess the stability of the
hypothesized effects. To be more precise, we included
control variables related to (1) additional incentive con-
trols, (2) context controls, and (3) controls related to
salespeople’s autonomous motivation (Homburg et al.,
2019). First, we include the extent of product incen-
tives and non-­monetary incentives for salespeople as
additional factors accounting for the configuration of
the compensation system. Second, to account for the
salespeople’s work context we include the level of prod-
uct complexity, leader fixed effects, and endogeneity
correction terms in the model estimation. The endoge-
neity correction terms based on the control function ap-
proach, which we describe in more detail in the results
10 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
section and Web Appendix F can help to control for un-
observed heterogeneity in salespeople’s work context.
Third, we control for a broad set of variables reflecting
salespeople’s autonomous motivation. Accounting for
salespeople’s autonomous motivation in our model is
essential, since beyond extrinsic motivation induced by
monetary incentives on which we focus in our article,
autonomous motivation may assume a key role for the
selling of complex service innovations. To his end, we
draw on the conceptualization of autonomous motiva-
tion of Ryan and Deci (2004) and Hackman and Oldham
(1975). Following this concept, salespeople’s autono-
mous motivation comprises salespeople’s feelings of
competence, autonomy, and relatedness with col-
leagues. Implementing this idea, in the area of salespeo-
ple’s perceived competence we control for salespeople’s
perceived selling knowledge (Homburg & Jensen, 2007)
and skill. Related to salespeople’s perceived autonomy
at the workplace, we account for salespeople’s offer
creation autonomy and opportunity for risk-­taking.
Regarding relatedness with one's jobs and colleagues,
we control for salespeople’s organizational identifica-
tion (Wieseke et al., 2012), job satisfaction (Hackman &
Oldham 1975), as well as team identification (Wieseke
et al., 2012).
5.2.6 | Measurement validity and reliability
Table 1 presents descriptive statistics and correla-
tions. To assess the reliability and convergent validity
of our measurements, we inspected Cronbach's alpha
and conducted a confirmatory factor analysis, employ-
ing respective standard procedures (Diamantopoulos
& Winkelhofer, 2001). All Cronbach's alpha values
of the scales exceeded the recommended threshold of
0.7 (Nunnally, 1978; for values in detail please refer to
the Appendix). For the confirmatory factor analysis,
we initially inspected the item reliabilities and found
that all items exceed the recommend threshold of 0.4
(Bagozzi & Yi, 1988). Moreover, the results of the con-
firmatory factor analysis showed that our scales fulfill
the recommended values for the composite reliability
and average variance extracted (Bagozzi & Yi, 1988).
Only one control variable has an average variance ex-
tracted of 0.49 and thus falls below the recommended
threshold of 0.50. We found that the squared correla-
tions between the latent constructs are smaller than the
average variance extracted from each construct, which
supports the discriminant validity of the scales (Fornell
& Larcker, 1981). These results indicate that our meas-
urements possess convergent and discriminant validity
and adequate reliability.
5.3 | Model specification
We conducted the model estimation in a step-­wise manner,
initially estimating a baseline model with controlled effects
only, and a second model including only the hypothesized
relationships, but no control variables. In a third step, we
specified a structural path model, as depicted in Figure 1.
First, we specify the quadratic and linear effects of variable
compensation share on salespeople’s problem-­solving be-
havior and the effect of salespeople’s problem-­solving be-
havior on innovative service selling success. Importantly,
related to our main hypotheses and in line with recommen-
dations for the testing of non-­linear relationships (Haans
et al., 2016), we include the main effect of service incentives,
the linear interaction of service incentives and variable
compensation share, as well as the quadratic interaction ef-
fect on salespeople’s problem-­solving behavior. Second, we
include the linear effect of variable compensation share on
salespeople’s work effort and, in turn, the effect of work ef-
fort on innovative service selling performance. We centered
all predictor variables on their grand mean to reduce multi-
collinearity issues and to facilitate the interpretation of in-
teraction effects (Hofmann & Gavin, 1998). Web Appendix
D shows the formal equations.
6 | RESULTS
Table 2 presents the results of our estimation. We used
STATA 16 and a robust maximum likelihood estimator
(Finney & DiStefano, 2008; Muthén & Muthén, 2012)
and account for nesting of salespeople in country units
through the Huber/White estimator, as suggested for ex-
ample by Asparouhov and Muthén (2006) (see Table 2).
This estimator computes a variance-­covariance matrix for
the model estimation under consideration of the nested
data structure and then calculates the respective standard
errors based on this adjusted variance-­covariance matrix.
In what follows, we describe our findings and interpret
them in light of our hypotheses. In H1 we predicted that
salespeople’s share of variable compensation exhibits
a quadratic interaction effect with service incentives on
salespeople’s problem-­solving such that the relationship
follows an inverse u-­shaped function if service incentives
are strongly pronounced. We find support for H1 because
the quadratic interaction effect of variable compensation
share and service incentives on problem-­solving is nega-
tive and significant (b = −0.001, SE = 0.0006, p < 0.05).
We illustrate this result in Figure 2, which illustrates
the inverse u-­shape of the relationship if services incen-
tives are high. To assess whether the effect is indeed in-
versely u-­shaped, we examined whether the slope of the
curve is sufficiently steep at both ends of the data range,
 ALAVI et al.

TABLE 1 Descriptive statistics and correlations

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
(1) Innovative service selling
(2) Problem-­solving 0.13**
(3) Effort 0.06 0.08
(4) Variable compensation 0.04 −0.06 0.16***
(5) Service incentives 0.13** 0.07 0.11* 0.21***
(6) Risk-­Taking 0.01 −0.08 0.05 0.11** 0.04
** *** ***
(7) Non-­Monetary Incentives −0.12 0.01 0.25 0.19 −0.04 0.11*
** ***
(8) Job satisfaction 0.15 0.19 −0.01 −0.05 0.08 0.03 −0.02
*** ** **
(9) Knowledge −0.03 0.17 0.14 0.14 0.04 0.02 0.12** 0.12**
(10) Team identification −0.11* 0.18*** 0.04 0.09* 0.14** 0.12** 0.20*** 0.24*** 0.22***
** *** **
(11) Product complexity −0.02 −0.08 0.07 0.05 0.13 0.16 −0.01 −0.12 −0.03 0.08
*** ** ** *** *
(12) Product incentives 0.06 0.18 0.12 0.14 0.35 −0.01 0.09 0.02 0.05 0.05 −0.04
(13) Salesperson skill 0.04 0.38*** 0.22*** −0.04 0.09 0.05 −0.04 0.21*** 0.38*** 0.20*** −0.07 0.15**
*** ** *** *** *** ***
(14) Org. identification −0.02 0.25 0.13 −0.04 0.00 0.04 0.19 0.39 0.21 0.59 0.08 0.08 0.28***
(15) Offer autonomy 0.14** 0.12** 0.05 0.07 0.15** −0.00 −0.12** 0.06 0.13** −0.09 0.10* 0.19*** 0.09* −0.01
Mean 0.102 6.290 48.716 8.700 4.129 4.468 0.558 5.901 5.248 5.354 3.557 5.707 5.604 6.113 4.463
SD 0.135 0.705 7.331 4.55 11.887 1.398 0.497 0.961 0.984 0.987 1.332 1.518 0.857 0.803 1.677
Min 0 3.67 25 1 1 1 0 1.667 1 2 1 1 3 3.4 1
Max 1 7 72 21 7 7 1 7 7 7 7 7 7 7 7
Notes: Salesperson service incentive = Extent to which variable compensation is based on turnover with services. Salesperson share of variable compensation = Percentage of salespeople’s total compensation, which is
dependent on work performance.
Abbreviations: M, mean; SD, standard deviation; SP, salesperson.
***p < 0.01; **p < 0.05; *p < 0.1.
  
|
11
12 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING

TABLE 2 Results of the model estimations

Model 3:
Baseline Main effects Model 2: Leader Endogeneity
model only Main model fixed effects correction
Main effects
SP share of VC → −0.009 (0.008) −0.004 (0.008) 0.001 (0.008) 0.036 (0.042)
Problem-­solving
SP share of VC² → 0.000 (0.002) −0.001 (0.001) 0.000 (0.002) −0.003 (0.004)
Problem-­solving
SP service incentives (SI) → 0.059 (0.023)** 0.025 (0.024) 0.025 (0.030) 0.024 (0.023)
Problem-­solving
SP share of VC → SP work effort 0.261 (0.136)* 0.273** (0.122) 0.363** (0.144) 0.271** (0.122)
(H3: +)
Problem-­solving → SP innovative 0.224 (0.057)*** 0.241*** (0.061) 0.242*** (0.061) 0.240*** (0.060)
service selling success (H2: +)
SP work effort → SP innovative 0.010 (0.009) 0.014* (0.007) 0.014* (0.007) 0.015** (0.007)
service selling success (H4: +)
Interaction effects
SP share of VC × SP service 0.002 (0.005) 0.008** (0.003) 0.004 (0.005) 0.008** (0.004)
incentives → Problem-­solving
SP share of VC² × SP service −0.001* (0.000) −0.001** (0.000) −0.001* (0.000) −0.001** (0.000)
incentives → Problem-­solving
(H1: −)
Controlled effects on SP innovative service selling success
SP share of VC 0.023 (0.021) 0.023 (0.020) 0.023 (0.020) 0.079 (0.106)
SP share of VC² −0.003 (0.002) −0.003 (0.002) −0.003 (0.002) 0.006 (0.009)
Non-­monetary incentives −0.249 (0.203) −0.302 (0.194) −0.302 (0.194) −0.310 (0.190)
Product incentives 0.023 (0.041) 0.009 (0.039) 0.009 (0.039) 0.099 (0.041)
Risk taking 0.018 (0.044) 0.032 (0.043) 0.032 (0.043) 0.033 (0.045)
Job satisfaction 0.197 (0.061)*** 0.206*** (0.058) 0.206*** (0.058) 0.193*** (0.055)
Offer autonomy 0.061 (0.038) 0.051 (0.037) 0.051 (0.037) 0.052 (0.036)
SP knowledge −0.062 (0.051) −0.065 (0.053) −0.065 (0.053) −0.070 (0.054)
SP customer skills 0.037 (0.087) −0.047 (0.087) −0.047 (0.087) −0.026 (0.089)
SP organizational identification 0.052 (0.129) 0.003 (0.130) 0.003 (0.130) 0.004 (0.129)
SP team identification −0.173 (0.129) −0.168 (0.126) −0.168 (0.126) −0.175 (0.133)
Product complexity −0.019 (0.049) −0.011 (0.050) −0.011 (0.050) −0.026 (0.061)
Controlled effects on SP problem-­solving
Non-­monetary incentives 0.021 (0.095) 0.040 (0.093) 0.238* (0.122) 0.028 (0.094)
* * *
Product incentives 0.048 (0.025) 0.064 (0.027) 0.051 (0.028) 0.061** (0.027)
Risk taking −0.050 (0.028)* −0.043 (0.029) −0.040 (0.033) −0.044 (0.030)
Job satisfaction 0.039 (0.040) 0.034 (0.042) 0.043 (0.042) 0.023 (0.045)
*
Offer autonomy 0.031 (0.024) 0.040 (0.023) 0.034 (0.025) 0.046** (0.022)
SP knowledge 0.009 (0.051) −0.010 (0.051) 0.036 (0.071) −0.013 (0.049)
*** *** ***
SP customer skills 0.243 (0.052) 0.251 (0.051) 0.201 (0.057) 0.261*** (0.047)
SP organizational identification 0.100 (0.059)* 0.091 (0.061) 0.125* (0.070) 0.093 (0.062)
SP team identification 0.034 (0.045) 0.056 (0.050) 0.028 (0.052) 0.055 (0.050)
Product complexity −0.025 (0.024) −0.025 (0.025) −0.019 (0.026) −0.033 (0.026)
Controlled effects on SP work effort
Product incentives 0.409 (0.328) 0.308 (0.307) 0.205 (0.303) 0.308 (0.307)
(Continues)
ALAVI et al.    | 13

TABLE 2 Continued

Model 3:
Baseline Main effects Model 2: Leader Endogeneity
model only Main model fixed effects correction
Risk taking 0.245 (0.326) 0.120 (0.282) 0.256 (0.311) 0.120 (0.282)
*
Job satisfaction −0.759 (0.454) −0.578 (0.468) −0.406 (0.431) −0.578 (0.468)
Offer autonomy 0.066 (0.255) −0.011 (0.269) −0.170 (0.233) −0.011 (0.268)
SP customer skills 1.67 (0.517)*** 1.867*** (0.506) 1.74*** (0.518) 1.867*** (0.506)
SP organizational identification 1.230 (0.650)* 1.393** (0.638) 1.22* (0.667) 1.394** (0.638)
*
SP team identification −0.548 (0.470) −0.762 (0.486) −0.988 (0.595) −0.762 (0.486)
Product complexity 0.212 (0.257) 0.320 (0.267) 0.419 (0.266) 0.320 (0.267)
Leader fixed effects included –­ –­ –­ Included –­
Control function approach
Endogeneity correction term for –­ –­ –­ –­ Included
SP share of VC
Endogeneity correction term for –­ –­ –­ –­ Included
SP share of VC²
Model fit
R² SP work effort 7.21% 2.62% 10.46% 33.42% 10.45%
R² problem solving 20.22% 1.84% 22.12% 35.31% 22.46%
R² SP innovative service selling 7.41% 1.89% 10.01% 10.00% 10.53%
success
n 294 294 294 294 294
Notes: Bold indicates the important values in the model estimation.
We report unstandardized coefficients (standard errors in brackets).
Abbreviation: SP, salesperson.
ns. p > 0.10
*p < 0.10; **p < 0.05; ***p < 0.01 (two-­tailed).

that is, for low versus high shares of variable compen-
sation. That is, we calculated simple slopes for low and
high shares of variable compensation which were both
significant conforming to this criterion of Haans et al.
(2016) (blow variable compensation = 0.099, SE = 0.053, p < 0.10;
bhigh variable compensation = −0.093, SE = 0.052, p < 0.10).
Eventually, the turning point of the curve where the sim-
ple slope of variable compensation share equals zero is at
approx. 52%, which is located within the value range of
the variable, providing additional support to H1. In H2,
we proposed that salespeople’s problem-­solving increases
their innovative service selling success. Results show a
positive significant effect of problem-­solving on innova-
tive service selling success (b = 0.241, SE = 0.061, p < 0.01)
confirming H2. In H3, we suggest that variable compensa-
tion share increases salespeople’s work effort for which
we find support (b = 0.273, SE = 0.122, p < 0.05). H4 in
turn proposes that work effort contributes to salespeople’s
success in selling complex service innovations. Results
show a positive, marginally significant effect of work ef-
fort on service innovation selling success, providing tenta-
tive support for H4 (b = 0.014, SE = 0.007, p < 0.10).
We undertook several steps to verify that endogeneity
issues do not unduly influence our findings. That is, we
implemented the well-­established control function ap-
proach to correct for endogeneity (see Table 2 and Web
Appendix F), discuss potential sources of endogeneity and
draw on longitudinal data to assess endogeneity through
reversed causation (see Web Appendix F). Moreover, Web
Appendix F reports results of a validation of the inversely
u-­shaped effect through a model free analysis and Web
Appendix G through an analysis of using salespeople’s
project level data.
7 | DISCUSSION
7.1 | Research insights
The core goal of this article was to examine effects of
monetary sales incentives on salespeople’s behavior
when selling complex service innovations. We find that
the share of variable compensation exerts an inverse u-­
shaped effect on salespeople’s problem-­solving behavior
14 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
if service incentives are high. Further, we observe a
positive effect of monetary incentives on a salesperson's
work effort, which tends to increase innovative service
selling success.
Our study contributes to innovation research in several
ways. First and foremost, our study contributes import-
ant insights to literature on complex service innovations.
Complex service innovations constitute a cornerstone in
the competitive strategy of numerous industrial compa-
nies (Bond et al., 2020; Troilo et al., 2017; Ulaga & Reinartz,
2011), but salespeople often lack the motivation to effec-
tively sell these innovations (Ulaga & Reinartz, 2011). Our
study reveals innovation-­related sales incentives as a key
success factor in this respect. Specifically, large shares of
variable compensation combined with pronounced ser-
vice incentives harm the problem-­solving behaviors that
salespeople need to effectively sell complex service inno-
vations (Stock, 2015). We thus reveal an important reason
why companies might fail at bringing complex service in-
novations to market. We contribute to this literature field
because pertinent past works had not yet explored poten-
tial nonlinear effects of different incentive components,
rather pointed to positive effects of monetary incentives,
and had not focused on complex service innovations.
Second, most prior studies on complex service inno-
vations have focused on qualitative research methods
and have therefore indicated that future research should
quantitatively investigate the role of sales in this field
of research (e.g., Blocker et al., 2012; Terho et al., 2012;
Ulaga & Reinartz, 2011). These studies are almost unan-
imous in suggesting that the most pertinent requirement
for contemporary service salespeople is their distinct
problem-­solving behavior (Stock, 2015). Our analysis em-
pirically confirms this assumption by unveiling the salient
positive effect of problem-­solving behavior on innovative
service selling success. Based on this finding, future stud-
ies on the role of sales in selling complex service innova-
tions should denote particular attention to salespeople’s
problem-­solving behavior.
Third, prior studies on complex service innovations
have indicated that future research should empiri-
cally investigate the role of sales in steering practices
(Storbacka, 2011; Ulaga & Loveland, 2014). As Storbacka
(2011, p. 700) notes, “there is little research that details
and categorizes the capabilities and management prac-
tices pertinent to the effective management of a solution
business model.” Our analysis unveils such distinctive
management practices and thus further complements
the scarce findings in this field of research (e.g., Beuk
et al., 2014; Homburg et al., 2019). Our findings suggest
that sales managers are required to maintain a delicate
balance between motivating salespeople through incen-
tives and reducing pressure on salespeople, indicating
that they need to engage in ambidextrous management
behavior in the service innovation context (Atuahene-­
Gima, 2005). In this respect, leadership behavior may
interact with the parameters of sales incentive schemes.
Therefore, future studies should consider both incentive
parameters and management practices when examining
sales management of firms adopting complex service
innovations.
Fourth, beyond these contributions to innovation man-
agement literature, we also make a contribution to sales
force incentive literature. Over the past decades, two highly
contradicting conceptions about the performance effects
of monetary sales incentives have emerged (Jenkins et al.,
1998). One group of studies finds that monetary incentives
advance selling performance (e.g., Lazear, 2000; Locke et al.,
1988), whereas another group of studies finds that mone-
tary incentives impede sales performance (e.g., Condry,
1977; Kohn, 1993; Zoltners et al., 2013). Our study recon-
ciles these opposing views within the context of complex
service innovations. Specifically, we find that the share of
variable compensation positively influences work effort.
However, greater monetary incentives hinder salespeople’s
problem-­solving behavior if service incentives are high, pre-
sumably because they induce performance pressure (Habel
et al., 2021). Future studies should devote particular atten-
tion to both behaviors when investigating the seemingly
ambivalent performance effects of monetary incentives.
To build our conceptualization, we used SFT as our pri-
mary theoretical framework (e.g., Baumeister, 1984). To
develop a more comprehensive theoretical understanding,
we encourage future studies to pit SFT against adjacent
theories. Two particularly interesting contestants in this
respect might be self-­determination theory (SDT; Deci &
Ryan, 1985) and agency theory (e.g., Eisenhardt, 1989).
As to the first, SDT examines drivers of intrinsic motiva-
tion and has been shown to effectively predict innovation
selling success (e.g., Homburg et al., 2019). Because we
controlled for drivers deduced from SDT in our empirical
models, our findings suggest that SFT has an incremental
explanatory power on top of SDT. Future research might
build on this finding and delve deeper into the interplay
of SDT and SFT. To elaborate, the two theories likely in-
teract, because incentives can “crowd out” intrinsic mo-
tivation (Deci & Ryan, 1985). High sales incentives might
thus actually be a double whammy for innovation selling
success, decreasing problem-­solving behavior (SFT-­based
path) while simultaneously reducing intrinsic motivation
(SDT-­based path). We consider examining this hypothesis
to be a very interesting avenue for future research.
In addition, agency theory explains the usage and the
effects of sales incentives. Agency theory examines con-
tracts between principals (e.g., management) and agents
(e.g., salespeople) in relationships characterized by goal
ALAVI et al.
FIGURE 2 Interaction diagram
conflicts and information asymmetry (e.g., Eisenhardt,
1989). For example, when demand is uncertain and sales
is volatile, agency theory prescribes behavior control (i.e.,
close monitoring and direction) rather than outcome
control (i.e., sales incentives)—­the latter would shift risk
to salespeople and potentially reduce their motivation
(Anderson & Oliver, 1987). Importantly, when selling
complex service innovations, salespeople are likely to face
such uncertain demand and volatile sales. Thus, the neg-
ative effect of high service sales incentives uncovered by
our study might also be explained by agency theory, in
addition to SFT. Future research might disentangle the
explanatory power of the two theories for consequences
of monetary sales incentives for innovation selling.
7.2 | Managerial implications
Our findings provide actionable implications for man-
agers who aim to bring complex service innovations to
market. First, managers need to carefully configure sales
incentives to ensure high problem-­solving behavior and
effort. As Figure 2 illustrates, managers can expect the
highest level of problem-­solving behavior when salespeo-
ple’s variable compensation is strongly based on service
selling success and the share of variable compensation
is at a medium level. In the case of the company that we
studied, this medium share of variable compensation
amounted to approximately 50%. For both a lower and
higher share of variable compensation, innovative service
selling success decreases, which we attribute to either a
lack of motivation or to an increasing self-­focus due to
performance pressure. Interestingly, though, further in-
creasing the share of variable compensation will continue
to increase salespeople’s effort. Managers thus need to
decide how much additional sales effort they are willing
to “buy” at the cost of problem-­solving behavior. When
   | 15
making this tradeoff decision, we encourage managers to
consider their employees’ well-­being and limit the share
of variable compensation reasonably (Habel et al., 2021).
Second, beyond the empirical evidence in our study,
our theoretical examination suggests that managers aim-
ing for innovative service selling success need to limit
performance pressure on their salespeople. While per-
formance pressure in our study came in the form of in-
centives, it might also be caused by other means, such
as managers’ appeals, excessive behavioral control (e.g.,
monitoring), or peer pressure. In the aftermath of our
study, the company that we studied actively took mea-
sures against such pressure. Specifically, top manage-
ment initiated a training program for sales managers to
deepen the management and leadership skills needed
to help salespeople cope with performance pressure.
Certainly, such a program offers an ideal environment to
discuss the ramifications of pressure on salespeople for
complex service innovations.
7.3 | Limitations and further research
Our study has limitations that provide opportunities for
continued investigations. That is, we focus on monetary
sales incentives and their specific design, offering im-
portant implications on how to facilitate salespeople’s
motivation to put effort into selling innovative services
and adapting their familiar way of selling. Future stud-
ies can build on our results and verify the effectiveness
of other sales management instruments for innovative
service selling success, such as non-­monetary sales in-
centives, leadership behavior, or type of control. By
comparing different instruments and probing potential
interrelations with monetary sales incentives, research-
ers could generate additional advice for the appropriate
sales management design in service innovation contexts.
16 |    THE AMBIVALENT ROLE OF MONETARY SALES INCENTIVES IN SERVICE INNOVATION SELLING
We acknowledge that the relevance of salespeople’s
problem-­solving behavior for innovative service selling suc-
cess might vary across service types, such as tacit versus ex-
plicit services. Our context conforms to the characteristics
of tacit services, where customers have difficulty express-
ing their needs and salespeople’s effort to understand those
needs and develop individual solutions is crucial (Storey
et al., 2016). In contrast, problem-­solving behavior might
be less relevant for explicit services, where salespeople can
succeed by “satisfying expressed needs, developing incre-
mental innovations, and building on what has been offered
before” (Storey et al., 2016). We encourage researchers to
probe potential differences in the role of salespeople’s prob-
lem solving behavior for explicit as opposed to tacit services.
Eventually, we have conducted our study in the con-
struction industry within a specific firm setting. The shift
to and adoption of complex service innovations as well as
the organization of the sales force in this industry setting
is comparable to other industrial settings. However, we
acknowledge that idiosyncrasies of this context may have
affected our findings. Consequently, future research could
replicate our findings in other industries and in a multi-­
firm study to increase generalizability.
ACKNOWLEDGMENT
Open access funding enabled and organized by
ProjektDEAL.
CONFLICT OF INTEREST
We hereby declare that we do not have any conflicting in-
terests concerning this research.
ETHICS STATE MENT
We hereby declare that we have conducted the research
in full compliance with the journals ethical standards and
with the ethical standards of our university.
ORCID
Sascha Alavi https://orcid.org/0000-0002-8262-0806
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AUTHOR BIOGRAPHIES
Dr. Sascha Alavi is professor of sales manage-
ment, and chairman of the Sales Management
Department at the Ruhr-­University of Bochum,
Germany. His research interests include sales & in-
novation management, digital transformation, sus-
tainability and employee well-­being. He has pub-
lished in journals such as the Journal of Marketing,
Academy of Management Journal, Journal of the
Academy of Marketing Science, Journal of Retailing,
Journal of Service Research, and International
Journal of Research in Marketing.
Dr. Eva Böhm is professor of Marketing at the
Technical University of Dortmund, Germany.
Her research interests include industrial service
strategies, value selling, and solution selling.
Her works are published in journals such as the
Journal of the Academy of Marketing Science,
Journal of Service Research, and Industrial
Marketing Management.
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Dr. Johannes Habel is associate profes-
sor of marketing at the C.T. Bauer College of
Business,University of Houston, US. His research
interests include sales management, pricing, and
relationship management. His works are pub-
lished in journals such as the Journal of Marketing,
Journal of the Academy of Marketing Science,
Journal of Service Research, and International
Journal of Research in Marketing.
Dr. Jan Wieseke is professor of sales & marketing,
and chairman of the Sales Management Department
at the Ruhr-­University of Bochum, Germany. His
research interests include sales management, per-
sonal selling, sales strategy, and sales leadership.
He has published in journals such as the Journal of
Marketing, Journal of Marketing Research, Journal of
Applied Psychology, Journal of Consumer Psychology,
Journal of the Academy of Marketing Science,
Journal of Retailing, Journal of Service Research, and
International Journal of Research in Marketing.
Dr. Christian Schmitz is professor of sales & mar-
keting, and chairman of the Sales Management
Department at the Ruhr-­University of Bochum,
Germany. His research interests include sales
management, key account management, sales
technologies, and customer relationship manage-
ment. He has published in journals such as the
Journal of Marketing, Journal of the Academy of
Marketing Science, Journal of Service Research, and
International Journal of Research in Marketing.
Dr. Felix Brüggemann works as the chief ex-
ecutive officer of the jetlite GmbH in Hamburg,
Germany. His research interests include sales
management, sales incentives, and solution sell-
ing. His works are published in the Journal of
Personal Selling and Sales Management.
SUPPORTING INFORMATION
Additional supporting information may be found in the
online version of the article at the publisher’s website.
How to cite this article: Alavi, Sascha, Eva Böhm,
Johannes Habel, Jan Wieseke, Christian Schmitz,
and Felix Brüggemann. 2021. “The Ambivalent Role
of Monetary Sales Incentives in Service Innovation
Selling.” Journal of Product Innovation Management
00: 1–­19. https://doi.org/10.1111/jpim.12600.