Three essays on teams and synergy

The pursuit of synergy, where the whole exceeds the sum of the parts, inspires the formation of teams: working together, team members can create synergy, and hence value, for a firm. This dissertation explores the interaction of synergy and team member characteristics under various performance measurement regimes. Specifically, I analytically model the impact of this interaction on the explicit and implicit incentives facing each team member and the resulting types and amounts of effort that team members choose. The results indicate that team composition and synergy play an important role in determining which performance measurement regime generates the highest agency welfare. A high-synergy setting favors the inclusion of a team output measure that encompasses this synergy, whereas a lower-synergy setting may favor individual input measures that do not reflect this synergy. Accordingly, no one performance measurement regime dominates in all circumstances.