Effective Leadership Selection in Complementary Teams

This paper considers effective leadership selection in a simple team-production model with heterogeneous agents. We demonstrate leadership success through synergy by showing that the existence of synergy is crucial for effective leadership. The synergy makes the team members' efforts complementary, which gives birth to eager leaders. We also show that, to elicit greater team production, a principal should appoint the agent with higher opportunity cost as the leader. Even if the agents' opportunity costs are unobservable to the principal, the principal can identify and select a better leader by proposing a larger position allowance for the leader.