A Theory of Turnover and Team Incentives Based on Image Concerns

Abstract:

The purpose of the paper is to analyze theoretically how social image concerns affect motivation problems in team production. One prominent feature of teams is mutual monitoring. Under close teamwork it is likely that team members can observe their behavior each other, and they care about how their intrinsic motivation toward team performance is perceived by the other members. I show that image concerns in teams explain why "bringing a guest in," hiring a new manager from outside ("new blood"), and rotation can have positive effects on team performance. Furthermore, I show that image concerns can either attenuate or aggravate the free-rider problem, and under some conditions the average team effort increases with adoption of team incentives, which is consistent with empirical evidence that positive peer effects are more pronounced under group piece rate.