SSRN Electronic Journal · 2006 · 44 citations · 34 references
Start‑up teams rely on a unique monitoring technology based on spatial proximity and high‑frequency decision making. The paper investigates how team size affects effort in start‑up teams. The authors extend Kandel and Lazear’s (1992) model to jointly analyze free‑riding and peer pressure, both of which depend on team size. Both the model and a large empirical sample show an inverted‑U relationship between effort and team size, with effort peaking in three‑member teams.
The paper analyzes the effect of team-size on effort in start-up teams. We extend the model of Kandel and Lazear (1992) to study the joint effect of free-riding and peer pressure, which both dependent on team size in our model. The special characteristic of start-up teams is their unique monitoring technology, which is characterized primarily by spatial proximity and high-frequency decision making. For such teams our model predicts an inverted U-shape relation between effort and team-size. Based on a large sample of start-ups we find strong evidence for the inverted U-shape relationship, with maximum effort in teams with three members.
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