Dynamic investment in teamwork skill: Theory and experimental evidence

Teamwork and collaboration are increasingly important. To understand the dynamics of teamwork skill formation, we provide the first systematic analysis of dynamic investment in teamwork skill. First, adopting a dynamic game approach, we develop a novel theoretical framework where investment in team skill creates persistent benefits and externalities for teammates, but where investment is risky because the benefits depend on successful team coordination. Second, we take this framework to the laboratory to study empirically the factors that influence dynamic investment in team skill. We find underinvestment compared to the efficient benchmark. However, investment in team skill responds strongly to incentives, in line with specific patterns predicted by our theory. We also find that people’s theory of mind and propensity to coordinate predict how much they invest in team skill. We conclude that careful design of team incentives and selection of team members can facilitate the dynamic development of teamwork skills.