Culture of trust and division of labor in nonhierarchical teams

Research Summary Firms exhibit heterogeneity in size, productivity, and internal structure, and this is true even within the same industry. Our paper provides evidence of a link between an organization's culture—specifically the trust environment—and its level of specialization. We show experimentally that exogenously‐imposed culture endogenously leads to variation in organizational form. We prime trust and demonstrate that the level of trust within an organization affects division of labor and consequently productivity in nonhierarchical teams. This evidence is consistent with a cross‐country link between trust and the division of labor that we observe in data from the European Social Survey. Managerial Summary Firms vary among many dimensions such as culture and internal organization even within the same industry. Trust is one component of corporate culture that is crucial for cooperation within organizations. In this paper, we show that the trust dimension of corporate culture can affect firm performance through internal structure, in particular the degree of division of labor. Using evidence from a game‐theoretic model, a lab experiment, and country‐level data, we show that an increase in trust leads to increased worker specialization. Our results suggest that increasing trust in work environments where division of labor is beneficial is one way to boost team productivity. RESOURCES This article has earned an Open Data badge for making publicly available the digitally‐shareable data necessary to reproduce the reported results. The data is available at https://osf.io/pr39h/. Learn more about the Open Practices badges from the Center for Open Science: https://osf.io/tvyxz/wiki.