The study examined how extrinsic rewards, perceived organizational support (POS), and work engagement interact to influence employee creativity. Extrinsic rewards include salaries, bonuses, incentives, benefits, promotions, and other forms of recognition provided by employers.
For startups, employee creativity is particularly important. Young technology-driven companies often operate in markets that change quickly and require employees to develop new ideas, solve problems, improve processes, and respond rapidly to customer needs. At the same time, the startup sector has faced periods of efficiency measures, workforce reductions, and what has been widely described as a “tech winter.”
Against this backdrop, reward systems are not simply about compensation. They can also influence how employees perceive their relationship with the organization and how willing they are to invest energy in their work.
How the Study Was Conducted
Jhonson and Panjaitan used a quantitative explanatory research design based on a cross-sectional survey. The researchers collected responses from startup employees in Indonesia, focusing on the Greater Jakarta or Jabodetabek area, where many technology startups are headquartered.
A total of 164 responses were initially collected. After screening, four responses were excluded because the respondents did not work for startup companies. The final analysis therefore included 160 valid startup employees.
Participants were selected purposively based on several criteria: they had to be actively employed by a startup, have at least one year of work experience in the organization, work full-time, and be located in Greater Jakarta.
Respondents evaluated statements using a five-point Likert scale, ranging from strongly disagree to strongly agree. The researchers then analyzed the relationships among the variables using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4.
The analysis assessed whether the survey measurements were reliable and whether the proposed relationships among extrinsic rewards, organizational support, work engagement, and creativity were statistically supported.
Extrinsic Rewards Directly Increase Employee Creativity
The findings show a significant positive relationship between extrinsic rewards and employee creativity.
The relationship produced a path coefficient of 0.267 with p < 0.001, supporting the first hypothesis. In practical terms, employees who perceive their compensation, incentives, recognition, and other rewards as appropriate are more likely to demonstrate creative behavior.
The research also found that extrinsic rewards significantly increase perceived organizational support. This relationship had a coefficient of 0.374 with p < 0.001.
This suggests that employees may interpret fair rewards as evidence that their organization values their contributions and cares about their well-being.
The next link in the process was particularly important. Perceived organizational support significantly increased work engagement, with a coefficient of 0.480 and p < 0.001.
Employees who feel supported are more likely to demonstrate enthusiasm, dedication, and psychological involvement in their work.
Finally, work engagement significantly increased employee creativity, producing a coefficient of 0.215 with p = 0.005.
Together, these findings describe a chain in which organizational rewards can contribute to creativity both directly and through employees’ perceptions and psychological involvement in their work.
Support and Engagement Create a Stronger Path to Creativity
The researchers also tested whether perceived organizational support and work engagement function together as sequential mediators.
The results confirmed a significant sequential mediation effect from extrinsic rewards → perceived organizational support → work engagement → employee creativity, with a coefficient of 0.039 and p = 0.017.
This means that financial or tangible rewards alone do not tell the entire story. Their influence on creativity can become stronger when employees interpret those rewards as organizational appreciation, develop stronger feelings of support, and subsequently become more engaged with their work.
The model nevertheless showed relatively modest explanatory power. The R² value for employee creativity was 0.151, meaning that the variables included in the model explained 15.1% of the variance in employee creativity. POS had an R² of 0.134, while work engagement had an R² of 0.225.
These figures indicate that other factors also contribute to creativity among startup employees.
What the Findings Mean for Startup Companies
The results offer several practical lessons for startup leaders and human resource managers.
First, companies should establish fair and competitive reward systems that recognize employee contributions. Salaries and financial incentives remain important, but they should be accompanied by non-financial recognition, career development opportunities, constructive feedback, and appreciation.
Second, startups should create workplaces where employees feel that their organization values their contributions and welfare. Organizational support can strengthen employee engagement, which in turn can encourage creative performance.
Third, managers should not treat creativity solely as an individual employee characteristic. The findings indicate that organizational practices can help create conditions in which creativity is more likely to emerge.
For startups operating under uncertainty, this approach can be particularly valuable. Employees who feel appreciated and supported may be more willing to devote energy to solving problems, developing ideas, and improving organizational processes.
Authors’ Perspective
The findings reinforce the application of Social Exchange Theory, which explains workplace relationships through reciprocal exchanges between employees and organizations. In the context examined by Jhonson and Panjaitan, favorable treatment through rewards and organizational support can encourage employees to reciprocate through stronger engagement and creative contributions.
The authors from Universitas Bunda Mulia emphasize that startup companies should not rely exclusively on financial incentives. Reward strategies need to be integrated with supportive human resource policies and work environments that encourage employee engagement and creativity.
The study also identifies important limitations. Because the research used a cross-sectional design, it cannot fully capture how employee attitudes and behaviors change over time. Its focus on startup employees in Jabodetabek also limits the generalizability of the findings to other Indonesian regions or countries.
Future research could examine additional factors such as intrinsic motivation, leadership style, organizational culture, psychological empowerment, job satisfaction, and innovative work behavior. Longitudinal research could also provide stronger evidence about how rewards and organizational support influence creativity over time.
About the Authors
Jhonson and Christy Ayu Sarah Panjaitan are affiliated with Universitas Bunda Mulia. Their research in this article focuses on human resource management, employee creativity, organizational support, work engagement, and reward systems in startup organizations.
Source
Article: “The Effect of Extrinsic Rewards on Employee Creativity: The Sequential Mediating Role of Perceived Organizational Support and Work Engagement Among Startup Employees in Indonesia”
Authors: Jhonson; Christy Ayu Sarah Panjaitan
Journal: International Journal of Economic, Finance and Business Statistics (IJEFBS)
Publication: 2026, Vol. 4, No. 4, pp. 397–410
DOI: 10.59890/ijefbs.v4i4.17
URL: http://journalijefbs.my.id/index.php/ijefbs
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