Should a team be homogeneous

Abstract Should an organization hire people with similar backgrounds or with different backgrounds? We formulate this question within the framework of team theory. The team is formed by n agents. The type of each agent is endogenous and determines his information structure and his cost for the team. We show that the sign of complementarity between jobs determines workforce homogeneity. With positive complementarities, the team should be composed of agents of the same type, while, with negative complementarities, workforce heterogeneity is optimal. These results do not rely on the restrictions on the way uncertainty is modeled or on the feasible set of agent types: they can be explained in terms of correlation between errors committed by different agents.

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