A Review of Research on Employee Incentive Mechanisms and Firm Performance from the Perspective of Behavioral Economics

Abstract

This paper reviews the relationship between employee incentives and corporate performance from the perspective of behavioral economics. As the limitations of traditional material incentive theory gradually emerge, behavioral economics provides new theoretical support for the optimization of incentive mechanisms. This paper first explores the core concepts of behavioral economics, including loss aversion, intrinsic motivation, framing effects and social norms, and compares them with traditional incentive theories. By analyzing the additions and modifications of behavioral economics to incentives, it reveals how it affects incentive design, which in turn improves employee motivation and corporate performance. In addition, this paper demonstrates the successful application of behavioral economics principles in corporate incentives by combining practical cases and discusses the marginal effects and potential problems of incentives. Finally, this paper summarizes the effectiveness of the application of behavioral economics in the design of incentives and proposes directions for future research, such as personalized incentives, long-term incentive effects, cross-cultural research and technology-driven incentive design. The study shows that by scientifically designing incentive mechanisms, companies can more effectively motivate employees, improve overall performance, and achieve long-term sustainable development.