Team size and diversity

We analyze the relationship between performance, team diversity and size. We first propose a model with knowledge spillovers in production, which predicts that the effect of a diverse team member – relative to the impact of a non-diverse team member – increases with team size. We experimentally test the model by randomly assigning students to solve knowledge questions in teams of different sizes, with or without a person with a diverse knowledge set. In line with the model, we find that the benefit of having a diverse rather than a same-skill colleague is greater in larger relative to small teams. These results have implications for how organizations can design their teams to maximize knowledge flows and performance.