Competition, Cooperation, and Corporate Culture

IZA Discussion Paper No. 2927

Zurich IEER Working Paper No. 328

37 Pages Posted: 13 Jul 2007

See all articles by Michael Kosfeld

Michael Kosfeld

Goethe University Frankfurt; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); University of Bonn - Center for Development Research (ZEF)

Ferdinand von Siemens

Goethe University Frankfurt; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2007

Abstract

Teamwork and cooperation between workers can be of substantial value to a firm, yet the level of worker cooperation often varies between individual firms. We show that these differences can be the result of labor market competition if workers have heterogeneous preferences and preferences are private information. In our model there are two types of workers: selfish workers who only respond to monetary incentives, and conditionally cooperative workers who might voluntarily provide team work if their co-workers do the same. We show that there is no pooling in equilibrium, and that workers self-select into firms that differ in their incentives as well as their resulting level of team work. Our model can explain why firms develop different corporate cultures in an ex-ante symmetric environment. Moreover, the results show that, contrary to first intuition, labor market competition does not destroy but may indeed foster within-firm cooperation.

Keywords: Competition, conditional cooperation, asymmetric information, self-selection, corporate culture

JEL Classification: D23, D82, L23, M54

Suggested Citation

Kosfeld, Michael and von Siemens, Ferdinand, Competition, Cooperation, and Corporate Culture (July 2007). IZA Discussion Paper No. 2927, Zurich IEER Working Paper No. 328, Available at SSRN: https://ssrn.com/abstract=1000171 or http://dx.doi.org/10.2139/ssrn.1000171

Michael Kosfeld (Contact Author)

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Ferdinand Von Siemens

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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