Leadership with Imperfect Monitoring

This paper provides experimental evidence on how monitoring intensity shapes the impact of leadership instruments like leading-by-example and punishment. The results show that, with low monitoring intensity, neither leading-by-example nor punishment increases cooperation if the leader can already send nonbinding signals about desired behavior. We identify two different reasons for this effect. Regarding leading-by-example, it is the cautiousness of the leader. Leaders are reluctant to recommend cooperative behavior and act accordingly, even though followers are particularly reciprocal in this context. Regarding punishment, it is the level of monitoring that matters. Monitoring of individual follower behavior increases the cooperation of leaders and followers across all treatments, but in particular, if the leader can punish uncooperative behavior. This result implies that monitoring in itself does not have a negative impact on the inclination to cooperate. It suggests that any motivational crowding out effect derives from a leader’s choice of monitoring, as it signals low trust in the followers. The paper concludes with a discussion of the implications.