Incentives, training, and education in promoting innovation in an Essay

Incentives, training, and education in promoting innovation in an organization - Essay Example One prime example of this is the link of incentives with innovation. The theory of extrinsic motivation teaches that an individual can be motivated to improve their efficiency and productivity at a task if they are rewarded with extrinsic rewards such as bonuses and promotions. However, as research proves, this does not apply in every case. When the task requires innovation and creativity, performance incentives can dampen the level of creativity (Ariely, 2010). This is because the employee starts to focus on the reward and is not able to give the task the due attention. Such incentives are only successful in boosting performance when the task is mechanical and does not require flexible and creative thinking. However, the innovative process requires creativity and flexibility. Thus, incentives do not play a significant role in the process of innovation. Vocational training, however, plays a large role in the process of innovation. A study conducted in 2007 gathered data from several firms, which provided training to their employees and had measurable performance. A thorough analysis of the correlation between these two factors revealed that innovation increases amongst employees who have received vocational training. The reason for this may be that the training gives the employee a firmer grasp on the nature of their work, and a deeper understanding about what their work means (Gallie and Legros, 2007). Thus, the individual is not confined to any boundaries in terms of knowledge or experience, and is thus able to employee creativity while working. This leads to training having a significant role in innovation. Similarly, education also proves to increase innovation levels in an organization significantly. Nelson and Phelps (1966) researched this correlation thoroughly, with the reasoning that â€Å"education enhances the ability to receive, decode, and understand information†. They studied the role of education for employees involved in the process of in novation and were able to prove that there is indeed a positive correlation between an employee having a high school or university education, and increases in the level of productivity and innovation. This correlation is empirically verifiable and visible in workplaces worldwide (Nelson & Phelps, 1966). Another important force that drives the innovative process, through its creation, management, and sustenance, is leadership. A recent study found organizational climate to act as an intervening variable between leadership behavior and innovation. They went on to claim that leadership has an important role to play in the establishment of an innovative climate in the work environment. The researchers found this correlation to be pertinent on both, work-unit level and organizational level. Research goes on to outline several leadership behaviors that can either stifle or encourage productivity. An example of a behavior that stifles innovation is to concentrate only on short-term goals a nd visible results. This can increase the pressure on the employees, which acts as a barrier for the innovative thinking process. In contrast, to encourage innovative thinking, the leader can arrange the work environment in a manner that allows for flexible thinking processes and creativity. This includes forming work teams and allowing the employees to interact with each other and discuss their ideas freely. For example, one can consider a

Opportunities and challenges by multi-national companies in setting an Essay

Opportunities and challenges by multi-national companies in setting an appropriate transfer price - Essay Example One of such implications that come with inappropriate transfer pricing, as mentioned above, is the possibility of the transfer-in subsidiary making a loss or just no profit at all on the sale of the products received from the parent subsidiary. If for example the parent subsidiary manufactures a certain product at a cost of say $700 and transfers it to the distributer in another country at a cost $800, it shall have made a positive contribution of $100. Depending on the market price, the distributer may incur another variable cost of $100 and sell the product at $1000. In this case, the manufacturer has made a profit while the distributer has not. Therefore, one side will be motivated while the other will be demoralised. Nonetheless, both sides will be required to pay tax. There is, therefore, a need to set up an appropriate transfer price that does not favor one side of an enterprise. The fact that these subsidiaries exist in different locations with different tax jurisdiction creates a complex puzzle for the MNE. It has always been a challenging task to come up with a plausible method of setting up the most appropriate transfer pricing that accommodates all these contrasting tax jurisdictions. In most host nations, when a subsidiary transfers goods to another, the local governments usually view the buy-in subsidiary as a target customer from whom to siphon revenues. This perception has led to mandatory taxation on the sales of such goods even if no considerable profit has been realised. It should be noted that the subsidiary from which the goods were transferred had also been taxed the authority under which it operates. Therefore, these two corporate have been taxed for the very product. This is called double-taxation. Double taxation is a liability to any MNE and may deter the realisation of net profit (ACCA, 2009). The principle of Arm’s Length had been proposed to resolve