Boss, Cut Me Some Slack: Control and Innovation in a Multitasking Environment

Innovation is difficult to measure and contract on. Motivating innovation in the presence of easier-to-measure execution tasks presents a basic management control problem for many organizations. This paper examines, at the employee level, the relationship between looser management control on execution tasks (measured as reduced time pressure on these tasks) and the probability of self-initiated innovation. Using detailed project- and employee-level data from a software company, I find that reduced time pressure on execution tasks is significantly associated with a greater probability of self-initiated innovation. Consistent with theories on employee selection and relational contracts, the above effect is more pronounced (1) for employees without significantly negative outcomes on past execution tasks, (2) for employees with a greater preexisting propensity to innovate, or (3) when the employee’s supervisor has a history of working with innovating employees. Conditional on submitting innovation prototypes, reduced time pressure on execution tasks is also significantly associated with higher-quality innovation. Collectively, these findings suggest that, in a multitasking environment, management control choices for non-innovation tasks could play an important role in enabling innovation.