Association for Public Policy Analysis & Management

A panel data analysis of FEVS data at the agency level from 2004, 2006, 2008, and 2010 to 2014 is employed to derive a causal relationship between employee empowerment and organizational performance, job satisfaction, and innovativeness.  Since there are no experimental data involving random assignment to empowerment treatment to date, these methods are expected to provide empirical evidence as well as tools to more correctly estimate such causal relationships in the public sector.  Findings from a panel data analysis like FE, RE or lagged dependent model show that overall empowerment increases organizational outcomes such as organizational performance, job satisfaction, and innovativeness over the periods.  More specifically, among the four empowerment practices, information, knowledge, and discretion practices have positive effects on organizational outcomes while performance-based rewards practice has negative effects, implying “crowding-out” between intrinsic motivation and extrinsic motivation.