Team Production in Business Organizations: An Introduction

For the past two decades, legal and economic scholarship has tended to assume that the central economic problem addressed by corporation law is getting managers and directors to act as faithful agents for shareholders. There are other important economic problems faced by business firms, however. This article introduces a Symposium that explores one of those alternate economic problems: the problem of "team production". Team production problems can arise whenever three conditions are met: (1) economic production requires the combined inputs of two or more individuals; (2) at least some of these inputs are "team-specific," meaning they have a significantly higher value when used in the team than in their next best use; and (3) the gains resulting from team production are nonseparable, making it difficult to attribute any particular portion to any single team member's contribution. In such situations, it can be difficult or impossible for team members to draft explicit contracts that protect their team-specific investments from other team members' opportunism. Thus the nine articles in the Symposium explore the implications of team production analysis for a wide variety of business organizations, including public corporations, private companies, multinational firms, and venture capital firms.