Teams, Location, and Productivity

The economics literature highlights a substantial influence of larger cities in improving worker skills and productivity, in particular, due to better means of information dissemination and learning. Studies in a variety of disciplines also reveal a positive role of team management for firm performance that results from diversified knowledge and skill sets of the team members. This suggests a positive relation between performance gains associated with team management and city size. Indeed, using U.S. equity mutual fund and demographic data, we show that teambased managerial approach leads to drastically different gains across different locations. We find that on average team-managed funds significantly outperform single-managed ones only in larger metropolitan areas. This result holds for an array of fund performance metrics and is robust to the inclusion of fund and manager characteristics controls. The effect, however, is concentrated among portfolio managers that survive several years of collaboration with the same team members. We interpret our findings as evidence of the enhancement of information and knowledge spillover in larger cities within team-based organizational structures. JEL classifications: D70, G23, J24