Communication and coordination in firms:A lab-in-the-field experiment with small manufacturers in Vietnam

Highlights • We conducted an incentivized four-person minimum effort game • The game targeted real firms involving an owner-manager and randomly selected workers • All the firms were trapped in coordination failure when communication was prohibited • Two-thirds of the firms achieved full coordination once communication was allowed • The successful coordination in the game was associated with daily communication Coordination is crucial for effective collective action; however, it is often challenging to achieve. Understanding the factors that facilitate coordination is particularly relevant for firms that require coordinated efforts for efficient production. In this study, we conducted an incentivized four-person minimum effort game involving 45 Vietnamese firms. Although games have been widely studied, they are typically conducted in laboratory settings. This study is the first to implement the game in real firms, where we invited an owner-manager and three randomly selected workers from each firm. In this game, the payoff depends positively on the minimum effort of the four players and negatively on their own efforts. During the first five rounds, when communication was prohibited, all firms were trapped in coordination failure, with low effort being made. However, when communication was allowed, many firms achieved a Pareto-efficient equilibrium with the highest level of effort in the subsequent five rounds. Importantly, firms that frequently communicate in their daily operations were more likely to achieve successful coordination. Workers in such firms adhere to the owner-manager’s suggestions regarding their level of effort. These findings highlight the importance of communication in facilitating coordination among firms.