This study examines the effect of reward structures on the performance of cross-functional product development teams. Results suggest that when it is easy to evaluate individual performances, position-based differential rewards lead to greater satisfaction. For long and complex projects, process-based rewards have a negative effect and outcome-based rewards have a positive effect on performance. For risky projects and highly competitive or relatively stable industries, a nonlinear and monotonically decreasing relationship exists between outcome-based rewards and product quality.
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