Abstract:
Organizations invest in cohesion so that team members care about one another's outcomes, yet such concern may affect not only how much members work but also what they work on. We study this distinction in a team-production model in which members allocate effort between safe routine work and risky experimentation. Each member values a teammate's payoff and is risk averse. Greater mutual concern raises the return to contributing to team output but magnifies the payoff risk that experimentation imposes on teammates even more. As a result, members work harder while experimenting less. Expected team output can fall even as total effort rises and can be U-shaped in the degree of mutual concern. Under a material-payoff criterion, the welfare-maximizing degree of mutual concern is generally interior. The same mechanism implies that larger teams can be more diligent yet less experimental when concern toward each teammate remains fixed. With heterogeneous exposure to team performance, more exposed members work harder but experiment less; when experimental authority must be concentrated in one member, assigning it to the less exposed member yields higher expected output. Finally, the core diligence--conservatism mechanism survives when experimental output is only partially shared across teammates, while differentiating experimental approaches encourages experimentation. Mutual concern therefore affects not only how hard team members work but also how they allocate initiative inside teams.
