On Broadway and strip malls: how to make a winning team

Abstract

A successful organization – or Broadway production – needs the right team. A potential issue is that an existing synergy between complementary agents (or assets) can reduce the marginal return of effort, creating a disincentive to invest. While agents always prefer to be in a team of complementary workers, a principal may wish to use non-complementary agents; this can occur if the loss from lower investment is sufficiently large. A principal, however, may opt for non-complementary agents when complementary workers would produce greater surplus. These insights have implications for job rotation, the central­ization versus decentralization of decision making and mergers.