How Formal and Informal Hierarchies Shape Conflict within Cooperatives: A Field Experiment in Ghana

As an organizational form, cooperatives are increasingly being used throughout the world across different industries and sectors. While it has been suggested that various benefits can be derived from shared ownership, cooperatives are often characterized by conflict among members that, in turn, can lead to eventual failure of the cooperatives. Existing theory has suggested that the choice of formal control structure can play an important role in mitigating conflict, but a longstanding debate exists as to whether flat versus hierarchical control structures are more effective. To add further insight into this theoretical discussion, we conducted a field experiment involving 40 newly formed cooperatives in rural Ghana, which were randomly assigned to either a flat or hierarchical control structure. The quantitative results of our field experiment and subsequent qualitative data suggest that formal hierarchical control structures lead to lower levels of collective psychological ownership, which in turn result in higher levels of conflict compared to flat control structures within cooperatives. However, our results also suggest that the extent to which the choice of formal control structures influences conflict among cooperative members can be highly dependent on the absence or presence of an informal hierarchy.