Competition, cooperation, and corporate culture

Abstract

Cooperation between workers can be of substantial value to a firm, yet its level often varies substantially between firms. We show that these differences can unfold in a competitive labor market if workers have heterogeneous social preferences and preferences are private information. In our model, workers differ in their willingness to cooperate voluntarily. We show that there always exists a separating equilibrium in which workers self‐select into firms that differ in their monetary incentives as well as their level of worker cooperation. Our model highlights the role of sorting and worker heterogeneity in the emergence of heterogeneous corporate cultures. It also provides a new explanation for the coexistence of nonprofit and for‐profit firms. “Here you don’t communicate. And sometimes you end up not knowing things. … Everyone says we need effective communication. But it’s a low priority in action. … The hardest thing at the gates when flights are delayed is to get information.”Customer service supervisor, American Airlines “There is constant communication between service and the ramp. When planes have to be switched and bags must be moved, customer service will advise the ramp directly or through operations. If there’s an aircraft swap operations keeps everyone informed. … It happens smoothly.”Customer service supervisor, Southwest Airlines1