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

Uschi Backes-Gellner, Arndt Werner () and Alwine Mohnen
Additional contact information
Arndt Werner: Institut für Mittelstandsforschung Bonn (IfM Bonn), (Institute for Small and Medium Size Enterprises, Bonn)
Alwine Mohnen: University of Cologne

No 54, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: This paper analyzes whether effort provision in entrepreneurial teams depends on the size of the team, assuming that size determines the strength of free-riding and peer pressure effects in entrepreneurial teams. We provide a theoretical model and empirical analyses to explain the joint effect of free-riding and peer pressure on effort in start-up teams. We begin with an economic model by Kandel and Lazear (1992) and enrich it using insights from entrepreneurship research. Based on our model, we first hypothesize that with increasing team size in entrepreneurial teams, the efforts of the individual team founders should follow an inverted U-shaped pattern. Second, we argue that the peer pressure effect is stronger if team members have stronger social ties, and thus we expect the effort-maximizing team size to be larger in teams with stronger social ties. Using a data set from 214 German start-up teams, we find that our hypotheses are supported by the data.

Keywords: Peer Pressure; Free-Riding; Entrepreneurial Teams; Team Size; Social Ties (search for similar items in EconPapers)
JEL-codes: M5 M13 M21 (search for similar items in EconPapers)
Date: 2014-09
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