Value Creation, Value Appropriation, and Cooperation in Team Production

Abstract

We propose a theoretical framework and develop a game-theoretical analysis to advance our understanding of the cooperation dilemma in team production. We conceptualize team production as a process where productive and appropriative activities coexist, shifting the focus from whether team members cooperate to what type of cooperative behavior they are willing to adopt. Depending on whether members cooperate to create value and compete to appropriate value, we can observe scenarios of full, partial, and no cooperation. After characterizing member behavior in the different scenarios, we study which form of cooperation can be sustained through repeated interaction, mutual monitoring, and reciprocity. To do so, we allow for different deviations from cooperation which are then accompanied by different reactions according to an equivalent retaliation strategy. Our focus is on how member behavior and incentives to cooperate relate to the size of the team. We also introduce conceptual elements that describe team production in organizational teams as well as inter-organizational relationships.