Reciprocity among CEOs

Abstract
We study reciprocation in an incentivized public good game using a sample of 500 Chinese CEOs of private medium-sized firms. This is interesting since reciprocity is considered central in facilitating cooperation within a firm and between the firm and external parties. In addition, CEOs often make decisions involving public goods with a high economic impact. The difficulties in recruiting this high-profile group to participate in academic research may explain why no other study so far has elicited CEOs’ full strategies in a public good game, which makes it possible to observe the CEOs’ responses to others’ actions and thus their reciprocity behavior. Our first finding is that reciprocal concerns, expressed as conditional cooperation strategies are very common among CEOs. We also report the result from a randomized experiment where we study the CEOs’ sensitivity to unequal contributions of other players. The finding is that even experienced business leaders’ reciprocity strategies are affected, not only by how much the other players contribute on average but also by how such contributions are distributed. Finally, we explore factors that may be linked to reciprocity and thereby correlated with conditional cooperation strategies. Cognitive reflection scores and Buddhist beliefs increase the probability for a CEO to follow a perfectly conditional cooperation strategy while being in a politically favored position decreases the same probability. Perfect conditional cooperation is also positively correlated with the probability that the CEO is the largest shareholder of the firm and that the firm is not involved in business disputes. However, we do not find any strong correlation between firm performance measures and the reciprocity strategy. Joint paper with Victor Nee (Cornell University).