Teamwork Efficiency and Company Size

Mikhail Galashin, Sergey V. Popov

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Abstract

We study how ownership structure and management objectives interact in determining the company size without assuming information constraints or any 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, and we 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), and we show that common intuition (e.g., that corporate companies are more efficient and therefore will be larger than equal-share partnerships) might not hold in general.
Original languageEnglish
Pages (from-to)337-366
Number of pages30
JournalBE Journal of Theoretical Economics
Volume16
Issue number1
Early online date17 Nov 2015
DOIs
Publication statusPublished - 2016

Keywords

  • team
  • partnership
  • effort complementarities
  • firm size

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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