Teamwork Efficiency and Company Size

Galashin, Mikhail and Popov, Sergey (2014): Teamwork Efficiency and Company Size.

Abstract

We study how ownership structure and management objectives interact in determining the company size without assuming information constraints or explicit costs of management. In symmetric agent economies, the optimal company size balances the returns to scale of the production function and the returns to collaboration efficiency. For a general class of payoff functions, we characterize the optimal company size, andwe compare the optimal company size across different managerial objectives. We demonstrate the restrictiveness of common assumptions on effort aggregation (e.g., constant elasticity of effort substitution), andwe showthat common intuition (e.g., that corporate companies are more efficient and therefore will be larger than equal-share partnerships) might not hold in general.

• Item Type: MPRA Paper
• Language: English
• Keywords: team; partnership; effort complementarities; firm size
• Subjects: D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; D - Microeconomics > D2 - Production and Organizations; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms

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