Chapter 3: Cooperative Behavior in Strategic Decision Making: Human Capital and Personality Traits

It has often been observed that people cooperate more than they would be expected to according to standard assumptions of individual rationality. In part, this empirical anomaly is due to the unrealistic assumptions concerning human behavior in economic models. Our study aims to offer new foundations for strategic decision-making behavior of individuals. We argue that human capital and personality traits are key in deciding whether or not to cooperate with a counterpart. Furthermore, we argue that the effect of a particular personality trait—that is, locus of control—on cooperative behavior is moderated by the level of human capital. The hypotheses are tested using Prisoner’s Dilemma games in an experiment with 182 university students. The results report significant direct effects of human capital and locus of control on cooperation and confirm the moderating relationship between the two.

Internals tend to cooperate more when having high levels of human capital. For externals, the effect is opposite, that is, externals tend to cooperate more when having low levels of human capital. In so doing, we open the black box of individual decision-making behavior and contribute to a growing field of behavioral strategy research that aims to strengthen the empirical relevance and practical usefulness of management theory.