Companies like to pit internal teams against each other. Bad idea.

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Subscribe to enjoy similar stories. Many organizations encourage competition between internal teams, believing it will spark innovation and drive performance. The trouble is, what actually happens is the opposite: Internal competition often stifles innovation.

That is what we found in a study of companies that pushed internal teams to compete with each other—whether for formal financial rewards like bonuses, or for informal ones like greater prestige, access to executives and influence. Yes, by some indicators, the teams ended up working harder when they were battling each other. But they failed in another crucial respect: The more teams competed, the less innovative they were.

Simply put, they were wary of sharing information with other teams, so they weren’t getting unexpected, inspiring ideas from people in other parts of the company. In fact, the only teams that excelled in the study were ones that did choose to share information with others, whether out of necessity or strategically. We started our research by looking at 73 teams from three engineering firms in renewable energy and enterprise software.

Competition between teams was prevalent. Organizations often created winner-takes-all incentives for annual bonuses and hiring head counts. Some team leaders also used their personal rivalry with other team leaders to create more targeted competition with other teams.

We found that this competition could make teams put in more hours and work more closely with their teammates, but it ultimately hurt their ability to innovate. What’s more, the more groups that one team competed against, the lower its innovativeness. People weren’t sharing information between teams, so they weren’t getting outside-the-box ideas to spur