Stilted synergy

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The prosperity of modern economies relies on cooperation. Businesses need employees to work together and collaborate. Ultimately, people need to be able to rely on others to keep the cogs of the economy turning.

The impact of the 2008 financial crisis was felt by businesses across Europe – but could adverse economic conditions also affect the psychology of individuals when it comes to their propensity to work together within those organisations?

Research by Nina Sirola, a postdoctoral fellow at INSEAD in Singapore, has sought to answer that question and explore how organisational behaviour can be shaped by economic influences. With a focus on trying to understand the direct impact of the macro context on individual employees, Sirola conducted two field studies and two experiments, to determine whether the perception of economic downturn undermines individuals’ willingness to cooperate.

Sirola’s doctoral research coincided with the recession in Europe in 2008-09, which had a huge impact on her home country of Croatia. “As an economy in transition, Croatia experienced a period of strong growth leading up to the recession, and the change in the economy created a dramatic change in the psychology of the entire nation, with people moving from extreme optimism to extreme pessimism in a matter of days,” she says.

Exploitative behaviour

Sirola began to wonder if this radical change in individual psychology would create a self-fulfilling prophecy. “We know about such responses by bank customers, called bank runs, and by investors, which is called panic selling – but I wondered whether something similar was happening among ordinary employees.”

Her theory was that adverse economic conditions would lead people to think others are more likely to behave exploitatively, which, in turn, would lead to people behaving less cooperatively, in case they were taken advantage of.

In two large-scale, attitudinal field studies, Sirola first examined how macroeconomic changes shape people’s perception of others’ exploitativeness. Her study combined individual-level data, obtained from the World Values Survey ( 2015 ), with country-level unemployment data from the World Bank Development Indicator database ( 2015 ).

statistical models

The World Values Survey measured the perception of others’ exploitativeness by asking respondents whether they think most people would try to take advantage of them if they had the opportunity. Using multilevel linear regression – a statistical model of parameters that vary at more than one level – with cases nested within countries, the results of Sirola’s study showed that high unemployment, gross domestic product (GDP) change and absolute GDP all had a significant effect on the perceptions of others’ exploitativeness.

The second study, which tested the theory on respondents solely from the US, merged data from The General Social Survey ( 2017 ) with region-pooled unemployment data from the Bureau of Labor Statistics ( 2012 ), to assess the correlation between unemployment and people’s perception of others’ exploitativeness. It also strengthened Sirola’s theory for the link between perceived exploitativeness and the state of the economy through unemployment, GDP change or absolute GDP.

While the field studies indicated a link, Sirola wanted to find out whether this perception altered their willingness to cooperate. To test her hypothesis, she conducted two experiments, the first among online workers and the second among employees working in US firms.

In the first study, participants were asked to read an article that purportedly described the actual economic conditions, and then take part in an investment game prototypical of situations offering potential for cooperation.

A perceived exploitativeness, measure was used to test whether it mediates the effect of economic downturn cues on cooperation. The experiment also investigated an alternative explanation – that economic conditions perceived to be weak undermine people’s likeliness to cooperate, not because they expect others to be more exploitative, but because they are concerned about their own financial situation. To rule out this explanation, the study defined the expected value of both options presented to the participants (‘cooperate’ v-s ‘do not cooperate’) as the same – that is, they can both lead to gains and losses. The measure of financial concern was still included in the study and used as a control mediator.

To offer further evidence of the theory that inferred exploitativeness reduces cooperation, the study examined whether participants made investment decisions in relation to another online worker or in relation to a computer, and measured the participants’ mood and general likelihood to take risks.

The fourth study sampled employees working in various US firms, using the same manipulation to prime their perception of the state of the country’s economy as weak or strong. Participants were asked whether they would choose to cooperate if they were given a job offer at another company, with an initially lower, but potentially higher, salary later on. This scenario was used to recreate a situation affording an opportunity for cooperation, where there is also potential to be exploited. As in the previous study, the results found that the participants in the downturn condition perceived others to be exploitative and were less likely to cooperate.

psychological experience

Relying on the manipulation of participants’ perception of the state of the economy through articles ostensibly describing the current economy, but actually describing it as either in a downturn or an upturn, was a challenge for Sirola – as such a manipulation is, of course, different from a real-life experience of learning that the economy is on the brink.

“At the same time, my theory concerns the psychological experience of a worker who receives news that the economy is performing poorly, keeping the worker’s personal situation constant,” says Sirola. “This is precisely the situation recreated in the experiment, ensuring good psychological realism. The claim that bad economic times in themselves erode important workplace activities is theoretically and practically important, and the current set of studies provides suggestive data that the effect might exist.” However, future study on the phenomenon is needed to corroborate these findings, she adds.

According to Sirola, the research suggests organisations should be proactive when it comes to managing the psychology of their workforce to avoid the erosion of productive work behaviour. “The findings illustrate that employees might respond to cues of economic downturns in a way that generates a dangerous self-fulfilling prophecy, whereby initial concerns about economic performance make employees less helpful and less collaborative, for example – possibly causing economic problems for the firm,” she says.

“Greater managerial efforts to emphasise the importance of cooperative and communal relationships when interacting with employees, or adding a joint-incentive component to the department, should motivate cooperation in the workplace after cues of economic downturns.

“It is unrealistic to build models of organisational behaviour by assuming that employees act in a vacuum. By examining how economic changes shape core organisational behaviours, this work helps toward understanding individual employees in a broader economic environment.”