Spillover Effects of Peer Incentives on Co-worker Productivity: Evidence from Patent Examiner Target Difficulty

This study investigates the effect of worker incentives on their co-worker’s productivity, in a setting in which they work on independent tasks. According to goal-setting theory, when a patent examiner’s target difficulty increases, her productivity will also increase. Co-workers, feeling pressured to keep up, may increase their own productivity in response. Simultaneously, in an effort to meet her more challenging performance target, the examiner may request more help from her co-workers or spend less time helping them, causing a decrease in her co-workers’ productivity. To investigate this question, a difference-in-difference design is estimated using internal US Patent and Trademark Office (USPTO) data on patent examiners’ incentives, output, and working groups. The findings indicate that a patent examiner’s increase in target difficulty causes a decrease in her coworkers’ productivity. This decrease is attributable to the examiner requesting additional help from her co-workers which detracts from the time they have to spend on their own tasks. These results suggest that individual worker incentives can negatively affect co-worker’s productivity, even when they work on independent tasks.