The Hidden Cost of Competition: The Effect of Competition for Monetary Rewards and Social Recognition on Psychological Pressure and Knowledge Sharing

Abstract

We examine the impact of competition for both monetary rewards (tournament compensation schemes versus piece-rate compensation) and social recognition (public disclosure of rankings with rank anonymity removed) on employee knowledge sharing with former competitors in a setting where knowledge sharing leads to neither a cost nor benefit for the person sharing. In such a setting, sharing results purely from goodwill towards the interaction partner. For this purpose, we conduct a two-part laboratory experiment and hypothesize that competition in the first task negatively affects knowledge sharing in the second, unrelated task. Our results support our hypothesis. We further show that this decrease in knowledge sharing is mediated by differences in psychological pressure induced by competition. Lastly, we find that the decrease in knowledge sharing results from the behavior of low performers in the competition, whereas knowledge sharing by high performers is not affected by competition.