Faculty of Economics and Business Administration Publications Database

Competition, Cooperation, and Corporate Culture

Volume: 42
Number: 1
Pages: 23 - 43
Month: Spring
ISSN-Print: 1756-2171
Link External Source: Online Version
Year: 2011
Keywords: Competition; Corporate culture; Equilibrium; Willingness to pay; Labor market; Existence theorems

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.