Behavioral Microfoundations of New Practice Adoption: The Effects of Rewards, Training and Population Dynamics

Abstract

Organizations face challenges when trying to effectively introduce new operational practices that substitute for existing ones. We study how the dynamics due to social comparisons between employees give rise to individual strategic considerations and eventually shape the organizational adoption outcome. We develop an evolutionary game theory model that accounts for these microlevel individual adoption decisions and their impact on macrolevel population adoption equilibria. Social comparisons invoke dynamics that expand the possible outcomes beyond the traditional nonadoption versus full-adoption dichotomy. Specifically, ahead-seeking social comparisons drive the long-term coexistence of practices because employees seek to differentiate their choices from those of others. Meanwhile, behind-averse comparisons create a bandwagon effect that determines adoption depending on the initial fraction of adopters—that is, employees who are trained upfront. These dynamics are robust to various settings: different conceptualizations of social comparisons, each employee responding to more than one kind of social comparison, and nonhomogeneous social comparisons across employees. Moreover, they are material to organizations that seek to maximize their profit when introducing a new practice, by setting the levels of upfront training and adoption rewards. Our results call for senior managers to account for such behavioral traits when managing the introduction of new practices. Profitable adoption critically relies upon matching rewards and training to the type of social comparison. This paper was accepted by Sridhar Tayur, entrepreneurship and innovation. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.00305 .