Dynamic Incentive Effects of Team Formation: Experimental Evidence

Thomas Gall, Xiaocheng Hu () and Michael Vlassopoulos
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Xiaocheng Hu: University of Exeter

No 10393, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Optimal team composition has been the focus of exhaustive analysis, academic and otherwise. Yet, much of this analysis has ignored possible dynamic effects: e.g., anticipating that team formation is based on prior performance will affect prior performance. We test this hypothesis in a lab experiment with two stages of a real effort task. Participants first work individually without monetary incentives and are then assigned to teams of two where compensation is based on team performance. Our results are consistent with a simple investment-cum-matching model: pairing the worst performing individuals with the best yields 20% lower first stage effort than random matching. Pairing the best with the best, however, yields 5% higher first stage effort than random matching. In line with the theory the latter result is more pronounced when the task has less scope for learning-by-doing. Moreover, pairing the best with the best achieves the same effort response as having explicit monetary incentives in the first stage.

Keywords: matching; team formation; performance; dynamic incentives (search for similar items in EconPapers)
JEL-codes: C78 C91 M54 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2016-11
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm, nep-ore and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Economics and Management Strategy, 28(4), 687-712, 2019.

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