Parallel team strategy, in which multiple teams simultaneously pursue project goals, has been widely adopted by high‐tech industries for knowledge creation. In this study, we investigate the design of organizational incentives, including a fixed wage payment and an additional reward structure, for effective management of the parallel team strategy. We consider two main variants of parallel teams–collaborative and non‐collaborative teams. Proposing and investigating three types of organizational reward policies, individual, aggregate, and contingent, we analyze the viability and characteristics of these policies. We show that individual reward policy performs better than aggregate policy, and that collaboration in parallel teams is vital. When parallel teams work non‐collaboratively or when aggregate reward policy is used for collaborative teams, the firm achieves optimal profits by only offering a share of the knowledge creation benefit as the reward. Under some conditions for collaborative teams, we demonstrate that individual and contingent reward policies can achieve maximal benefits (first‐best) for the organization. This research provides valuable insights for firms in employing parallel team strategy for knowledge creation.
