Value creation, value appropriation, and the extent of cooperation in organizational teams

Abstract 

The creation and division of a joint value is a defining feature of teams. Members should cooperate by providing their contribution and avoiding latent conflicts, but they might not have the incentives to do so. Going beyond examining the opposite situations, when members are cooperative or not, we conceptualize cooperation in teams in relation to the tension between value creation and value appropriation. Using a formal model, we examine scenarios of full, partial, and no cooperation, addressing the effects of team size on members’ behaviors. From a static perspective, we study when team size amplifies behavioral differences under various scenarios. From a dynamic perspective, we examine members’ willingness to cooperate by means of mutual monitoring and reciprocity. We account for different defections and posit that members calibrate retaliation based on the non-cooperative behaviors they observe in their team. Our model reveals that members of larger teams are less tempted to underinvest in value creation (shirking) and more tempted to overinvest in value appropriation (rent-seeking). We then provide the conditions for full and partial cooperation and discuss some implications of our findings for the organization and management of human assets.