Team Leadership and Performance: Combining the Roles of Direction and Contribution

Abstract

In knowledge-intensive projects, one of the challenges project team leaders often face is how to combine their roles of direction and contribution. In this paper, we propose a game-theoretic model of team leadership of coproductive projects and study how team leaders should combine their directing and contributing efforts depending on the team and project characteristics. Our analysis reveals that two types of team leadership approaches arise in equilibrium, namely, “participatory” team leadership, under which the team leader gives the team members full discretion on their choice of effort, and “directive” team leadership, under which the team leader demands team members exert higher effort than what they would choose to exert voluntarily. We find that directive team leadership is optimal when the team members have low incentives, that is, when their rewards are low, the size of the team is large, or failure is not too costly (e.g., continuation is possible); otherwise, participatory team leadership is optimal. Moreover, we show that a higher degree of effort complementarity (as in innovative projects) leads to greater alignment between the team leader’s and team members’ contributing efforts, which, under directive team leadership, also implies greater alignment between the team leader’s directing and contributing efforts. Finally, the team leader should set the team size and team members’ rewards in a way that accentuates the difference between the two team leadership approaches. That is, under directive team leadership, she should set a large team size and offer the team members low rewards whereas under participatory team leadership she should set a small team size and offer the team members high rewards. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2911 . This paper was accepted by Ashish Arora, entrepreneurship and innovation.