Organizational Structure, Communication, and Group Ethics

American Economic Review · 2010 · Volume 100 · Issue 5

Abstract

This paper investigates experimentally how a group's structure affects its ethical behavior towards a passive outsider. We analyze one vertical and two horizontal structures (one requiring consensus, one implementing a compromise by averaging proposals). We also control for internal communication. The data support our main predictions: (1) horizontal, averaging structures are more ethical than vertical structures (where subordinates do not feel responsible) and than consensual structures (where responsibility is dynamically diffused); (2) communication makes vertical structures more ethical (subordinates with voice feel responsible); (3) with communication, vertical structures are more ethical than consensual structures (where in-group bias hurts the outsider). (JEL C92, D23, L21, M14)

Keywords

Design of Experiments: Laboratory, Group Behavior, Organizational Behavior, Transaction Costs, Property Rights, Business Objectives of the Firm, Corporate Culture, Social Responsibility

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