In this study, we investigate the effects of faultline-induced conflict on individual effort and how incentives can be designed to overcome these negative effects. Faultlines are hypothetical dividing lines between group members based on various member attributes that can potentially split the overall group into subgroups. Results from our experiment show that team members are more likely to perceive conflict when they face a faultline-related issue, which, in turn, leads to lower effort by individual team members. Consistent with the theory of cooperation and competition, incentives moderate the effect of conflict on effort, such that team incentives have a greater effect to increase effort than individual incentives when the level of conflict is high, rather than low. Collectively, our findings suggest that competitive team incentives may be an effective tool to overcome the negative effects of faultline conflict in a group.

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