The Efficacy of Tournaments for Non-routine Team Tasks

Abstract: Tournaments are often used to improve performance in innovation contexts in which teams perform non-routine tasks. Tournaments may not only be effective because they provide monetary incentives but also because they render teams' identity and social image concerns salient. This study provides causal evidence on the relative importance of these behavioral aspects vis-a-vis monetary prizes in a non-routine task. Using a natural field experiment with more than 1,700 participants, we exogenously vary salience of team identity, social-image concerns, and whether teams face monetary incentives. We find that increased salience of team identity alone does not improve team performance. Social image due to a public ranking affects mostly top-performing teams, whereas additional monetary incentives improve outcomes for all teams across the performance spectrum. Further, the introduction of tournaments does not reduce teams' willingness to explore original solutions and does not crowd out intrinsic motivation to perform similar tasks in the future.