Competition Between Organizational Groups: Its Impact on Altruistic and Antisocial Motivations

Firms are often organized into groups. Group membership has been shown empirically to have positive effects, in the form of increased pro-social behavior towards in-group members. This includes an enhanced willingness to engage in altruistic punishment of inefficient defection. Our paper provides evidence of a dark side of group membership. In the presence of cues of competition between groups, a taste for harming the out-group emerges: punishment ceases to serve a norm enforcement function, and instead, out-group members are punished harder and regardless of whether they cooperate or defect. Our results point to a mechanism that might help explain previous mixed results on the social value of punishment, and also contribute to understanding the sources of conflict between groups. They also point to an important tradeoff for firms: introducing competition enhances within-group efficiency, but also generates costly between-group conflict. ∗We thank the editor, the associate editor, two referees, seminar and conference participants at Harvard University, George Mason University, UC Berkeley, UC Santa Barbara, University of Pittsburgh, Temple University, Tel Aviv University, Wharton School, Tilburg University, ESA Tucson for very helpful comments. †Department of Economics, University of Lausanne, Internef, 1015 Lausanne-Dorigny, Switzerland ‡Department of Economics, Swarthmore College, 500 College Avenue, Swarthmore, PA 19081, USA §Graduate School of Business, Columbia University, 3022 Broadway, New York, NY 10027, USA; [email protected] ¶Department of Public Finance, University of Innsbruck, Universitaetsstrasse 15, 6020 Innsbruck, Austria; Department of Economics, University of Gothenburg, Vasagatan 1, 40530 Gothenburg, Sweden