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The Division of Gains from Complementarities in Human-Capital-Intensive Activity
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The Division of Gains from Complementarities in Human-Capital-Intensive Activity
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Journal Article
The Division of Gains from Complementarities in Human-Capital-Intensive Activity
2012
Overview
This study uses data from the National Basketball Association to explore organizational mechanisms that affect the division of firm surplus in human-capital-intensive activity. It builds on the idea that reciprocal interdependence among team members creates the potential for complementarity. Complementarity, in turn, translates into higher firm surplus. The division of this surplus is subject to bargaining between the firm owner and labor. We argue that when complementarity increases, the firm owner's share of surplus will grow
if
interdependence among team members is symmetric. Furthermore, we identify three levers that make complementarity amenable to managerial design: the nature of
interaction
among team members, the relative
dominance
of team members, and the
composition
of a team. We find that greater interaction among team members and higher recruitment of team-oriented individuals are associated with increased complementarity, whereas dominant team members are associated with reduced complementarity. The study contributes to the literature on organization design by extending its implications to the division of surplus in human-capital-intensive activity.
