Debt Financing and Motivation

An individual's performance in a given activity is a function of her effort and her competence, as well as her surrounding conditions. Effort, in turn, can be divided into three characteristics: direction, intensity and duration. Intensity and duration of effort reflect the individual's motivation with respect to the given activity. Motivation is the product of a cognitive process that anticipates the outcomes of effort and, particularly, the degree to which the individual will be satisfied or dissatisfied with her performance.

While individuals might define satisfaction in terms of input (i.e., the amount of effort applied to the task), they more typically set standards for output (i.e., performance) that are derived from internal and external sources. Performance is commonly judged by a dichotomous success-failure standard as opposed to a graduated metric standard. This standard has both a prospective and retrospective impact on motivation. For example, an individual is motivated to raise her effort to avoid failure, and, if failure occurs, she may be motivated to redirect, intensify or prolong future effort to avoid the recurrence of failure.