Reward systems and employee creativity in Indian higher education: The mediating roles of individualism and collectivism

Abstract

Employee creativity is a critical organizational capability underpinning innovation and competitive advantage, yet the motivational and cultural conditions that foster it remain incompletely understood, particularly in emerging economy contexts. This study examines how financial and social reward systems influence employee creativity and whether individualism and collectivism mediate these relationships. Grounded in Self-Determination Theory and Hofstede's Cultural Dimensions Theory, the study adopts a quantitative cross sectional design using data from 410 employees of higher education institutions in Madhya Pradesh, India. Hypotheses were tested using Partial Least Squares Structural Equation Modelling (PLS-SEM) via SmartPLS 4. Results confirm that both financial rewards (β = 0.266, p < 0.001) and social rewards (β = 0.290, p < 0.001) exert significant positive effects on employee creativity, together explaining 60.7 percent of the variance in the dependent variable. Mediation analysis reveals that individualism significantly mediates the relationship between both reward types and employee creativity (financial: β = 0.111, p = 0.002; social: β = 0.096, p = 0.006), whereas collectivism does not produce a significant mediating effect in this context. These findings suggest that employees with achievement oriented and self driven cultural values are more responsive to organizational reward systems in ways that enhance creative output, while group oriented values do not operate as a meaningful channel in this setting. The study contributes to the organizational behaviour and creativity literature by integrating reward mechanisms and cultural orientation into a unified empirical framework, and offers evidence from an Indian higher education context that extends creativity theory to culturally diverse emerging economy settings. Practical implications are drawn for human resource managers and institutional leaders seeking to design culturally responsive reward and incentive systems.