Cooperation in Large Organizations: Exploring the Role of Formal Structure using a Field Experiment

Brahm, F, Loch, C and Riquelme, C (2022) Cooperation in Large Organizations: Exploring the Role of Formal Structure using a Field Experiment. Working Paper. London Business School Working Paper.

Abstract

Does cooperation decrease as an organization grows and, if so, how can formal structure help? We address these questions in the context of a workplace safety methodology that builds on workers’ cooperation. Our study presents two core findings. On cooperation and organizational size, conventional wisdom suggests a negative relationship between them, but recent experimental evidence contests this claim. We exploit a large archival dataset to show that while workers’ cooperation demonstrably reduce accidents, it weakens as the number of cooperators increases. We propose that a detailed, contextspecific understanding of how the benefits and costs of cooperation change with organizational size is crucial to unpack the relation between cooperation and size. Guided by a formal model, we show that differential “reputational” returns between early v/s late cooperators are critical in our setting. The study’s second core finding documents that dividing workers into groups/areas, a core feature of any formal organizational structure, can strongly sustain cooperation as organizations grow large. Using a preregistered field experiment, we manipulate the safety methodology by structuring workers randomly into separate groups. This restores cooperative effort and reduces the incidence of accidents. The mechanism for this result is the group structure increases the likelihood of repeated interactions which triggers reciprocitybased exchanges. This result shows that dividing workers into groups/areas provides benefits that go beyond the specialization and coordination gains that have been the focus of the organization design literature so far, also helping an organization to sustain cooperation as it grows large.