Team Size and Effort in Start-Up Teams - Another Consequence of Free-Riding and Peer Pressure in Partnerships

The paper analyzes the effect of team-size on effort in start-up teams. We extend the model of Kandel and Lazear (1992) to study the joint effect of free-riding and peer pressure, which both dependent on team size in our model. The special characteristic of start-up teams is their unique monitoring technology, which is characterized primarily by spatial proximity and high-frequency decision making. For such teams our model predicts an inverted U-shape relation between effort and team-size. Based on a large sample of start-ups we find strong evidence for the inverted U-shape relationship, with maximum effort in teams with three members.

Keywords: Peer pressure, free riding, start-up-teams, team size

JEL Classification: M5, M13, M21

Suggested Citation: Suggested Citation

Backes-Gellner, Uschi and Mohnen, Alwine and Werner, Arndt, Team Size and Effort in Start-Up Teams - Another Consequence of Free-Riding and Peer Pressure in Partnerships (March 2006). Available at SSRN: https://ssrn.com/abstract=518443 or http://dx.doi.org/10.2139/ssrn.518443