The Effect of Career Concerns on Team Assignment

We study team design in the presence of career concerns. In the model, the agents have explicit effort incentives from performance-dependent compensation contracts and implicit effort incentives from career concerns. With uniform teams, the principal assigns agents with similar career concerns to a team, whereas with mixed teams, the principal assigns agents with different career concerns to a team. We find that the characteristics of the available information are important determinants of organizational design. For example, the principal prefers uniform teams when there is only hard information about the agents’ ability, and she prefers mixed teams when there is soft information about the agent’s ability and the agents’ efforts contribute substantially to firm performance. Overall, our study contributes to the literature that documents the interactions between information and organizational design