Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/69434
Authors: 
Hoogendoorn, Sander M.
Parker, Simon Charles
van Praag, Mirjam
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7044
Abstract: 
This paper studies the impact of diversity in cognitive ability among members of a team on their performance. We conduct a large field experiment in which teams start up and manage real companies under identical circumstances. Exogenous variation in - otherwise random - team composition is imposed by assigning individuals to teams based on their measured cognitive abilities. The setting is one of business management practices in the longer run where tasks are diverse and involve complex decision-making. We propose a model in which greater ability dispersion generates greater knowledge for a team, but also increases the costs of monitoring necessitated by moral hazard. Consistent with the predictions of our model, we find that team performance as measured in terms of sales, profits and profits per share first increases, and then decreases, with ability dispersion. Teams with a moderate degree of ability dispersion also experience fewer dismissals due to fewer shirking members in those teams.
Subjects: 
ability dispersion
team performance
field experiment
entrepreneurship
knowledge pooling
moral hazard
JEL: 
C93
D83
J24
L25
L26
M13
M54
Document Type: 
Working Paper

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