IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp7044.html
   My bibliography  Save this paper

Ability Dispersion and Team Performance: A Field Experiment

Author

Listed:
  • Hoogendoorn, Sander M.

    () (University of Amsterdam)

  • Parker, Simon C.

    () (Western University, Canada)

  • van Praag, Mirjam C.

    () (Copenhagen Business School)

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.

Suggested Citation

  • Hoogendoorn, Sander M. & Parker, Simon C. & van Praag, Mirjam C., 2012. "Ability Dispersion and Team Performance: A Field Experiment," IZA Discussion Papers 7044, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7044
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp7044.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, pages 1238-1260.
    2. Papps, Kerry L. & Bryson, Alex & Gomez, Rafael, 2011. "Heterogeneous worker ability and team-based production: Evidence from major league baseball, 1920-2009," Labour Economics, Elsevier, vol. 18(3), pages 310-319, June.
    3. Alexandre Mas & Enrico Moretti, 2009. "Peers at Work," American Economic Review, American Economic Association, pages 112-145.
    4. Susana Iranzo & Fabiano Schivardi & Elisa Tosetti, 2008. "Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 247-285, April.
    5. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    6. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    7. Eric D. Gould & Eyal Winter, 2009. "Interactions between Workers and the Technology of Production: Evidence from Professional Baseball," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 188-200, February.
    8. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    9. Franck, Egon & Nüesch, Stephan, 2010. "The effect of talent disparity on team productivity in soccer," Journal of Economic Psychology, Elsevier, vol. 31(2), pages 218-229, April.
    10. Hong, Lu & Page, Scott E., 2001. "Problem Solving by Heterogeneous Agents," Journal of Economic Theory, Elsevier, vol. 97(1), pages 123-163, March.
    11. Hoogendoorn, Sander M. & van Praag, Mirjam C., 2012. "Ethnic Diversity and Team Performance: A Field Experiment," IZA Discussion Papers 6731, Institute for the Study of Labor (IZA).
    12. Oosterbeek, Hessel & van Praag, Mirjam & Ijsselstein, Auke, 2010. "The impact of entrepreneurship education on entrepreneurship skills and motivation," European Economic Review, Elsevier, vol. 54(3), pages 442-454, April.
    13. Lazear, Edward P, 1999. "Globalisation and the Market for Team-Mates," Economic Journal, Royal Economic Society, vol. 109(454), pages 15-40, March.
    14. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
    15. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    16. Zeynep Hansen & Hideo Owan & Jie Pan, 2006. "The Impact of Group Diversity on Performance and Knowledge Spillover -- An Experiment in a College Classroom," NBER Working Papers 12251, National Bureau of Economic Research, Inc.
    17. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding differences in health behaviors by education," Journal of Health Economics, Elsevier, vol. 29(1), pages 1-28, January.
    18. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding Differences in Health Behaviors by Education," Scholarly Articles 5344195, Harvard University Department of Economics.
    19. Mark Grinblatt & Matti Keloharju & Juhani Linnainmaa, 2011. "IQ and Stock Market Participation," Journal of Finance, American Finance Association, vol. 66(6), pages 2121-2164, December.
    20. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
    21. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Chia-Ching & Chiu, I-Ming & Smith, John & Yamada, Tetsuji, 2013. "Too smart to be selfish? Measures of cognitive ability, social preferences, and consistency," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 112-122.

    More about this item

    Keywords

    knowledge pooling; entrepreneurship; field experiment; team performance; ability dispersion; moral hazard;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7044. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.