Ability Dispersion and Team Performance: A Field Experiment

34 Pages Posted: 15 Dec 2012

See all articles by Sander Hoogendoorn

Sander Hoogendoorn

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Simon C. Parker

University of Western Ontario; Durham University - Department of Economics and Finance; IZA Institute of Labor Economics

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

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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.

Keywords: ability dispersion, team performance, field experiment, entrepreneurship, knowledge pooling, moral hazard

JEL Classification: C93, D83, J24, L25, L26, M13, M54

Suggested Citation

Hoogendoorn, Sander and Parker, Simon C. and van Praag, Mirjam, Ability Dispersion and Team Performance: A Field Experiment. IZA Discussion Paper No. 7044. Available at SSRN: https://ssrn.com/abstract=2189782

Sander Hoogendoorn (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Simon C. Parker

University of Western Ontario ( email )

1151 Richmond Street
Suite 2
London, Ontario N6A 5B8
Canada

Durham University - Department of Economics and Finance ( email )

23/26 Old Elvet
Durham DH1 3HY
United Kingdom
+44 191 3747271 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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