Team Production in International Labor Markets:
Experimental Evidence from the Field
Elizabeth Lyons∗
July 1, 2016

Abstract
Co-workers are increasingly diverse in their nationality and skill sets. This paper studies the effect of diversity on how workers are organized using data from a field experiment conducted in
an environment where diversity is pervasive. Findings show that team organization improves
outcomes when workers are from the same country. The opposite is true when workers arenationally diverse. These results are more pronounced for teams of workers with specializedskills. Further investigation of the data suggests that diverse teams have difficulty communicating. I find no evidence that preferences for or expectations about working with someone
from the same country is affecting team performance.

The globalization of labor markets is an important phenomenon. The number of immigrants employed in the U.S. grew from 11.7 million in 1994 to 19.3 million in 2003, and this pattern is
not restricted to the U.S. (International Labor Organization, 2012a).1 Multinational enterprises∗

School of Global Policy and Strategy, UC San Diego, 9500 Gilman Drive, La Jolla, CA 92093. lizlyons@ucsd.edu. I thank Ajay Agrawal, Avi Goldfarb, Nicola Lacetera, and András Tilcsik for their valuable guidance. I also benefited from the comments of Chris Forman, Alberto Galasso, Joshua Gans, Joshua Graff-Zivin, Mitch
Hoffman, John Horton, Bill Kerr, Bill McEvily, Anita McGahan, Amanda Pallais, Mike Ryall, Brad Staats, as wellas participants at the 2013 CCC Doctoral Colloquium and 2013 REER, and seminar participants at Cornell, Harvard
Business School, Johns Hopkins, London Business School, Toronto, USC, UC San Diego, and Washington University.
I gratefully acknowledge funding support from the Centre for Innovation and Entrepreneurship at the Rotman Schoolof Management, the Martin Prosperity Institute, and the Social Sciences and Humanities Research Council of Canada
grants #493140, #494787, and #486944. This research was approved by the University of Toronto Social Sciencesand Humanities Research Ethics Board, protocol reference #28221. This study is included in the AEA RCT Registry(AEARCTR-0001402).
1 Brookings reports that the share of immigrants in the U.S. labor force grew from 4.9% in 1970 to 16.4% in 2010.
The population of international migrants motivated by labor force opportunities is at least equal to the population ofBrazil (International Labor Organization, 2012b).

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are contributing to the international nature of labor markets as well.2 In addition to increases inlabor market diversity, team-based production in knowledge work is also becoming more common(Jones, 2009a; Wuchty et al., 2007), in part because of improvements in communication technologies (e.g. Dessein and Santos, 2006). Given the extent of labor market globalization, hiring
a multinational labor force is becoming inevitable in many countries and industries. Combinedwith the growth in team-based knowledge production, organizational success will likely become
increasingly dependent on the success of nationally diverse teams of workers.3
Because of the importance of communication for success in teams (e.g. Hinds and Mortensen,
2005), national differences in teams may be costly if they impede communication, for instance, byincreasing conflict and decreasing knowledge sharing (Hamilton et al., 2012; Hjort, 2014). However, national differences also may have benefits, including increases in creativity, problem-solving
abilities, and innovativeness (Haas, 2010; Lazear, 1999).4 Although the existing literature recognizes cultural and ethnic heterogeneity in teams as an important determinant of their performance,
evidence on the direction and extent of the effect of national diversity on organizational performance is sparse and ambiguous (e.g. Bertrand and Duflo, 2016; Horwitz and Horwitz, 2007; Reagans et al., 2004). By testing the causal effects of national diversity on team performance relative tonationally homogeneous teams and groups of independent workers, this paper addresses this gap.
Moreover, while the existing empirical literature provides evidence on the performance difference
between diverse and homogeneous teams of workers, it does not address the performance differences between organizing diverse workers into non-collaborative groups and organizing them into
teams. Understanding how to organize conditional on diversity is particularly important as diverse
work forces become harder to avoid, and increasingly expected of organizations.5
Existing theoretical and empirical literature on team work and diversity suggests potential gains
from and costs from coordination that may be intensified when workers are more different fromone another. In particular, team work introduces potential problem solving and learning benefits
due to complementary knowledge and ideas (e.g. Cooper and Kagel, 2005; Lazear, 1999). Beneficial complementarities may be higher in diverse than homogeneous teams because, for instance,
they have access to different information sources (Hamilton et al., 2012). However, team work also
introduces coordination costs that increase as communication becomes more difficult (e.g. Dessein
and Santos, 2006). Communication costs may be higher in diverse teams than in homogeneous
teams because, for instance, workers with different background have different understandings orinterpretations of similar statements and events even when they speak the same language (Lang,
1986). Given this evidence, it is possible that diverse teams perform better or worse than ho2 The size of total FDI stock as a percentage of world GDP in 2000 was 20%. Moreover, MNEs were responsible

for at least 3.4% of the world’s employment by 2000 (Kim, 2006).
3 Cross-country partnerships in MNEs are ubiquitous (e.g., Hays, 1974; Manev and Stevenson, 2001), and the
management of cultural differences among workers from different countries remains a major challenge (e.g., Gong,
2003; Kirkman and Shapiro, 2005; Makela et al., 2012).
4 For a more thorough review of research on organizational diversity, see Harrison and Klein (2007).
5 Organizations’ reputations are increasingly affected by how diverse their work forces are. Diversity may contribute to their ability to retain and attract workers and consumers. For instance, Fortune annually ranks companies on
the percentage of minorities on their work forces (Fortune, 2015).

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mogenous teams. Moreover, if communication costs from diversity are sufficiently high and gains
from complementarities do not compensate for these costs, diverse teams may under-perform noncollaborative groups even on tasks that would otherwise benefit from team work.
In order to address some of the uncertainty about worker organization and, in particular, to identify
the causal impact of national diversity on team outcomes, I designed and conducted a natural field
experiment on the online market for contract labor, oDesk6 . Workers on oDesk have selected into
an international labor market and thus may be more willing to engage with a diverse set of employers and co-workers than workers in a more local labor market. My experiment tests the impact oforganizing nationally diverse workers into teams by comparing diverse and homogeneous teams tosets of independent workers. This design permits me to identify the differential impact of national
diversity on the value of teamwork.
The experiment I ran, described in detail in Section 2, is a two-by-two design in which I randomly assigned contractors into groups of two to complete a web programming task that requires
a Javascript and a PHP programmer. Groups were randomly assigned to either work as a team or
not and were either made up of workers from different countries or not. All workers in the experiment are able to communicate in English.7 To reduce the potential for free riding problems withingroups, I assigned each group member to a specific portion of the task and required that the task becompleted in a setting where individual team member monitoring is possible.8 Field participants
were unaware that they were being studied and subject to conditions consistent with those that are
typical in their lines of work.
The findings from the empirical analysis, reported in Section 4, show that organizing contractors into teams improves outcomes for contractors in nationally homogeneous teams but worsens
outcomes for contractors in nationally diverse teams. Specifically, relative to the sample means,
teamwork leads to a 30% increase in output and a more than 50% increase in productivity fornationally homogeneous teams and a 33% decrease in output and a 75% decrease in productivity
in nationally diverse teams. Consistent with the idea that team members are more likely to rely
on collaboration when they have different skill sets, teamwork has a more positive impact on outcomes for same-country teams when team members have skill differences, but the opposite is true
for cross-country teams. In particular, nationally diverse teams with overlapping skill sets perform
significantly better than those with specialized skill sets, however, they still perform worse than nationally homogeneous teams and independent workers. These results are consistent with teamwork
being costlier for diverse teams than homogeneous teams and also suggest that overlapping skills
may compensate for some of the communication costs associated with a lack of shared nationality.
Further investigation of the data suggests that communication is more difficult for nationally diverse teams than it is for nationally homogeneous teams and that contractors in nationally diverse
6 The platform has since been renamed “Upwork”.
7 Given that language diversity may impact teamwork through different mechanisms than diversity due to cross-country differences in social and other work-related values (e.g. Hofstede, 1983; Landes, 1999), I ensure a minimum
level of English language ability among participants.
8 With this task assignment design, it is relatively easy to identify if a given group member cheats.

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teams are unaware of this relatively more difficult communication. I do not find any evidence that
contractors prefer to work with a country-mate, or that they have ex-ante expectations that diverse
teams perform worse than homogeneous ones.
These results provide robust evidence of the importance of communication costs in obstructing
team coordination. They imply that when communication costs, such as those present between
workers from different countries, cannot be managed, independent work may outperform teamwork even on tasks that would otherwise benefit from collaboration.
This paper proceeds as follows. Section 1 reviews related literature; section 2 describes the experiment design; section 3 describes the data collected from the experiment and my estimation
strategy; section 4 presents the empirical results, and section 5 summarizes and concludes thepaper.

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Labor Market Diversity LiteratureThis paper contributes to a large and vibrant literature on diversity in the labor market and, inparticular, how this diversity relates to organizational performance. A number of dimensions ofdiversity have been considered in this literature including gender (Adams and Ferreira, 2009),
functional (Boone and Hendriks, 2009), and linguistic (Lazear, 1999).9 Existing theories of theperformance implications of diversity highlight the trade-offs between coordination costs and returns from access to a more disparate idea and knowledge sets across all types of worker diversity(e.g. Dessein and Santos, 2006). However, the extent of these costs and benefits, and their overall
impact on performance vary depending on the source of diversity. Given that the experiment I
present in this paper considers nationally diverse groups of workers hired for a task that requires
two types of skills, in this section I focus on literature related most closely to national and skill
diversity.

1.1

Performance Implications of National Diversity

Empirical literature on immigrant worker hiring provides some of the most relevant evidence onnational diversity in organizations for this paper. In general, this literature finds that immigrants
are less likely to be hired in their new countries than seemingly equally qualified natives. For
instance, in an audit study performed in Canada, Oreopoulos (2011) finds that applicants with
non-English names are significantly less likely to receive callbacks than those with English names.
Employers surveyed for the study self-report that this is due to concerns about language abilities
although the experimental evidence presented in the paper does not support this explanation. Using data from a national survey, Leslie and Lindley (2003) find some support for these employers’
9 Refer to Bertrand and Duflo (2016) for a more thorough review of diversity in the labor market.

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claims. In particular, they find that some of the employment and earnings differences between
whites and non-whites in Britain can be explained by language disadvantages. Kaas and Manger(2012) also provide evidence of applicant discrimination from an audit study for the German labor market with additional evidence that differential callback rates for immigrants disappear whenapplications include reference letters on applicants’ personalities. In a related study undertaken
in Belgium, Baert et al. (2015) find that applicants with foreign names are more likely to receive
lower callback rates for jobs with easier to fill vacancies. McGinnity and Lunn (2011) find similar
evidence among immigrants and natives in Ireland, however, they find no evidence that this discrimination depends on occupation. In an analysis of the UK’s General Household Surveys, Bell(1997) demonstrates increases in labor market performance among black immigrants as they accumulate more local experience. The author attributes this to an assimilation effect. Agrawal et al.
(2013b) show similar patterns among employers hiring through online labor markets. In particular,
developed country employers disproportionately hire developed country workers despite the large
wage premiums they command. This hiring differential falls as workers accumulate more experience on the platform. These studies demonstrate that organizations prefer to hire native workers
suggesting a preference for less national diversity. In addition, they provide some suggestive evidence that discrimination against foreign workers may be due to doubts about how well foreignhires’ will communicate and integrate with existing work forces.
Despite the apparent preference among hiring managers for nationally homogeneous work forces,
whether they outperform nationally diverse work forces is unclear. To my knowledge, empiricalstudies of the firm-level performance implications of nationally diverse work forces are limited
to several studies of cross-subsidiary team performance in MNEs and of cross-country virtual
teams.10 Combined, these studies find that the performance of these teams depends on the way
they are managed (e.g. DiStefano and Maznevski, 2000; Gong, 2003; Jarvenpaa et al., 1998).
These studies do not analyze whether nationally homogeneous teams would perform differently
than nationally diverse ones under the same circumstances. They do, however, point to the role ofmanagement in reducing costs and capturing benefits in these teams.11
While the literature of immigrant labor market performance and of cross-country team management provide important evidence on how firms deal with national diversity, they do not provide
evidence on whether nationally diverse groups of workers perform better or worse than nationallyhomogeneous groups, or how national diversity affects the returns to team work. This paper willcontribute to these literatures by testing these questions, in addition to providing suggestive evidence that manager concerns about communication difficulties among nationally diverse workers
may be warranted.
10 There have been several studies on how population diversity and immigration affect regional economic perfor-

mance. These studies generally find positive impacts of population diversity and economic performance (e.g. Alesina
et al., 2013; Ottaviano and Peri, 2006). As these papers highlight, the impact of national diversity on team performancedoes not capture the many other ways that national diversity may affect an economy.
11 This is similar to evidence presented in Kochan et al. (2003) which shows that the performance implications ofracial and gender diversity in firms depend on how they are managed. Given this evidence, the lack of managerial
support in my experiment is an important boundary condition.

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Beyond the literature on national diversity, a number of papers consider one or more element ofdiversity that may also vary between countries. Among the most relevant of these elements formy analysis is ethnic diversity.1213 Hjort (2014) experimentally tests the performance effects of
ethnic diversity among teams at a flower production plant in Kenya. He finds worse performanceoutcomes for teams made up of workers from rival tribes than those made of workers from thesame tribe, and provides evidence that this is due to taste-based discrimination between workers.
Marx et al. (2015) also experimentally test the performance implications of ethnic diversity inteams in Kenya, and find that ethnic diversity between workers of the same rank has negative performance effects but that diversity between managers and subordinates has positive performance
implications. Furthermore, the authors provide survey evidence that homogeneous co-workers
made better production decisions potentially because they were more willing to collaborate. Bothof these studies demonstrate that ethnic diversity can be harmful when workers have preferences
for working with others from their own ethnicity. In the Netherlands, a setting with (arguably) lessethnic tension than Kenya, (Hoogendoorn and Praag, 2014) experimentally test the effect of ethnic
diversity on the performance of start-ups among students. In contrast to Hjort (2014) and Marx etal. (2015), they find that ethnically diverse teams outperform ethnically homogeneous teams. The
authors provide suggestive evidence that this is due to returns from increased knowledge diversity
in diverse teams.
These papers provide useful evidence for thinking about the performance of nationally diverse
teams. However, ethnic diversity does not always vary across countries (Alesina et al., 2013) and,in some cases, may vary more within a country than across countries.14 As a result, ethnic diversity
may have different effects on performance than national diversity. Moreover, the mechanisms
through which they affect performance may differ. For example, labor market culture appears todiffer more at the national level than the regional level (Hofstede, 1984). In contrast within-country
differences in average educational attainment across ethnicities differs more in some instances than
average educational attainment across countries (e.g. Barro and Lee, 2013; Kao and Thompson,
2003). It is plausible, therefore, that ethnic diversity may matter more or less than national diversity
for the performance of teams and that the direction and causes of their impact on performancediffer.
12 In my setting, ethnicities differ both within and across countries. I find no evidence, however, that within country
ethnic diversity affects the performance of teams in my study.
13 Other worker characteristics that may vary at the national level include race, and colonial ties. Given that myexperiment is restricted to workers from India, Pakistan, and Bangladesh, these are unlikely to vary much in mysetting.
14 For instance, Alesina et al. (2011) demonstrate that national borders have frequently been drawn in such a waythat ethnic groups are divided into more than one country. In my empirical setting, some ethnic groups are divided bynational borders. For instance, a number of enclaves, defined as “...a portion of one state completely surrounded by
the territory of another state”, exist on both sides of the India-Bangladesh border (Jones, 2009b).

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1.1.1

Explanations for Performance Effects of National Diversity

As the studies on ethnic diversity summarized above point out, diversity may affect performancefor a number of reasons. For instance, nationally diverse work forces may perform worse on average than nationally homogeneous ones because they communicate less effectively as predicted byLang (1986) and Lazear (1999). Communication costs may be higher in nationally diverse teams
for instance because of language differences (Lazear, 1999), lack of trust (De Dreu and Weingart,
2003; Guiso et al., 2009), differences in social and work norms which may lead to different ininterpretations and understandings of concepts and goals (Hofstede, 1984), and differences in cognitive frameworks which may also lead to differences in how the same information is processed(Dahlin et al., 2005).15 All of these possibilities, as well as the possibility of other mechanisms,
may be driving communication costs in nationally diverse teams.16
An alternative explanation to that of higher communication costs for relatively poor performanceof nationally diverse teams is animosity for workers from other countries (Alesina and La Ferrara,
2005). In particular, as demonstrated by (Hjort, 2014; Marx et al., 2015), individuals may get positive utility from working with others who are like themselves, and negative utility from working
with those unlike themselves. This is conceptually distinct from communication costs because
workers prefer to avoid working with those who are different from themselves based on preferences, as opposed to being unable to effectively work with them due to communication barriers.
An additional possible explanation for worse performance among nationally diverse teams is thatworkers expect that they will not be able to work well with someone from another country even
if it this belief is not ex-ante accurate, and even if workers have no animosity towards those fromother countries. This explanation is consistent with evidence that stereotype threats can decrease
performance (e.g. Schmader et al., 2008). Alternatively, this could occur because of the common belief that ones own type has superior knowledge and abilities than those who are different(Brewer, 1979) which could lead workers to not listen to or take advice from teammates from othercountries.
As in Hoogendoorn and Praag (2014), national diversity can also increase team performance bygiving teams access to a more diverse knowledge or idea set. In my setting, as discussed in sections
2.3 and 4, nationally diverse teams may well have larger knowledge sets than nationally homogeneous teams do. Moreover, given that tasks requiring creativity and problem solving benefit morefrom knowledge diversity (Audretsch and Feldman, 2004), the task they are assigned (describedin detail in section 2.2) likely benefits from more knowledge and ideas. Due to measurement
limitations, I do not test directly for whether nationally diverse teams approach completing the
15 In the experiment presented in this paper, workers are all able to communicate in English, and anecdotal evidence

from chat room screen shots suggests they do communicate with each other in English. Language differences, therefore, may not be a relevant explanation for performance differences in this context. However, even when speaking thesame language, linguistic differences between nationally diverse workers may persist (Kachru, 1992).
16 Testing for which are present in my empirical setting is beyond the scope of this paper, but an important area for
future research.

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assigned task in more creative ways than nationally homogeneous teams, or whether nationallydiverse teams have less overlap between team members in how they approach the same problem.17
Causally establishing the reason for the performance differences between nationally diverse andhomogeneous teams is beyond the scope of this paper. However, I test for and suggestively rule outsome of the explanations outlined above. In particular, I find no evidence that workers in diverse
teams dislike their teammates with more frequency than those in homogeneous teams nor do I findany evidence that workers in diverse teams have difference ex-ante expectations about their performance. Moreover, anecdotal evidence from chat room screen shots demonstrates that all teamtypes appear to communicate in English. I do find evidence indicative of communication difficulties in diverse teams. As a result this paper contributes to our understanding of the mechanisms thatdrive the performance effects of diversity in teams by demonstrating that even in the absence oftaste-based discrimination, language differences, and poor expectations about team performance,
national diversity can lead to large enough difficulties that gains from teamwork are eliminated.

1.2

Performance Implications of Skill Diversity

Related to knowledge diversity is skill diversity. Consistent with Ingram and Neumann (2006),
skills in this context are classifications for specific abilities needed for the completion a given task.
It is thus easier to characterize and measure skill diversity than knowledge diversity which may
occur even between workers with the same skill set. Like national diversity, skill diversity may
introduce additional communication costs and complementarities in teams. Lazear (1999) showsthat teams with less overlap between their skill sets lead to more gains from complementarities
when the skills are relevant for the job. However, skill diversity may also lead to higher communication costs because workers are less able to evaluate or understand ideas or input on a skill they
are not familiar with (Ferreira and Sah, 2012; Galbraith, 1977), or because workers are less able toknow what types of knowledge to ask for from their teammates (Rulke and Galaskiewicz, 2000).
Empirical evidence on the impact of skill diversity on organizational performance is relatively thin.
For instance, Hamilton et al. (2003) and Hamilton et al. (2012) find that increases in skill diversity
withing teams leads to increases team performance. However, the authors define skill diversity
as differences in average productivities or ability levels as opposed to occupation categories. Mas
and Moretti (2009) also find that combining low and high productivity workers has a positive
impact on performance relative to having workers with similar productivities work together. The
mechanisms through which productivity diversity affect performance are likely different than thosethrough which skill diversity as defined in this paper affect performance.
Importantly, the costs and benefits of skill diversity may enhance or dampen those introduced bynational diversity. For instance, at the regional level, Alesina et al. (2013) find that skill diversity
17 Given that nationally diverse teams perform significantly worse than all other organizational forms in my study,

if there are benefits to diverse knowledge sets in my setting, they do not outweigh the costs of diversity.

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among immigrants increases the positive economic impact from immigrant birth country diversity.
In contrast, Dessein and Santos (2006) argue that one way of reducing communication costs withinteams is to decrease team member specialization so that there is more overlap in skill sets acrossteam members. Combined, these papers suggest that skill specialization in teams may increase thebenefits to complementarities between team members, but it may also exacerbate communication
problems.18 By testing how skill diversity affects national diversity in teams this paper provides,
to my knowledge, the first empirical evidence of how the effects of skill specialization vary acrossteams with different communication costs and complementarities.

2

Experimental Design

Identifying the causal impact of national diversity on the value of teamwork is problematic because
teams are selected and not randomly assigned. This endogenous team formation makes it difficult
to disentangle both the value of teamwork as compared to independent work and the differential
impact of teamwork for nationally diverse teams. For example, it is plausible that employers andworkers choose which jobs to complete as a team and that they choose who should work together
in teams according to their performance expectations. To address these concerns, I test the effects
of national diversity on work team success by conducting a field experiment on the world’s largest
online contract labor platform, oDesk.
To perform the study, I set up an employer account on the oDesk website and posted jobs to attract
contractor bids. I hired contractors who met the requirements for participation in the experimentand randomly put them into groups of two to complete a programming task. I define teams in thisstudy as pairs of contractors working towards a common goal. Below I describe the setting of theexperiment, the task, team compositions, and the hiring and work process used for the experiment.

2.1

Research Setting

I generate data for this analysis through a natural field experiment conducted using oDesk, aninternational online market for contract labor. At the time of the experiment, oDesk was the largest
contract labor platform in the world in terms of earnings, and the fastest-growing. By offering
more flexible conditions and competition than traditional labor markets as well as the potential for
more efficient matching and investments in human capital (Autor, 2001; Grossman and Helpman,
2002; Horton, 2010; Oster and Millett, 2010), online labor markets such as oDesk may be able toabsorb a meaningful portion of jobs that are now completed offline and locally.
oDesk (now “Upwork”) operates as a mediator and matches employers with contract laborers who
18 I empirically test whether skill diversity affects nationally diverse and homogeneous teams differently in section

4.1.2.

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work on jobs remotely. To hire on oDesk, employers create an account on the site and post jobs
for which they are looking to hire. Job postings typically include a brief description of the job, andthe type of contract being offered (fixed price or hourly wage payment). Contractors interested inbeing hired for jobs can apply to them by submitting a bid to indicate the amount they are willing toaccept to work on the job and a cover letter describing why they are suited for the job. Contractors
also advertise their skills and abilities to employers through their profile pages. Contractors set up
their profile pages when they join the site. These pages can include information on their education,prior work histories,19 and scores from tests administered by oDesk. Profile pages also provide
information on where contractors live. Contractors can be actively employed by multiple jobs at
once.20
There are several reasons I chose to run this experiment on oDesk. First, oDesk provides a teamroom application which allows employers to put hired contractors into teams so that they canwork together online. In particular, contractors working in the same team room can monitor what
the others are doing and chat with each other through instant messaging. Contractors can only
be logged into one team room at a time. Employers on oDesk frequently require that multiple
hires work in the same team room.21 Second, the team room facilitates contractor monitoring by
employers through frequent screen shots, memos, work diaries, and activity meters. As a result, themajority of employers on oDesk require that their hires complete their tasks while logged into theirteam room. Another important feature of oDesk for this research is the option to interview. oDesk
encourages employers to interview contractors they are interested in hiring before making any
offers. These interviews can take place through messages exchanged on the site. Lastly, oDesk is
an international labor market which contractor participants have selected into knowing they would
almost surely be working with employers and contractors from other countries. Therefore, wemight expect to see less distaste for working with a nationally diverse organization than in more
local labor markets.

2.2

The Task

To test my research question, I needed contractors to be assigned a task for which collaboration
is not unnatural. At the same time, because I am comparing team work to independent work,
contractors working on their own should be capable of completing at least some portion of the
19 Platform-specific work histories include a list of all jobs performed on oDesk with a brief description of each job,

the hiring employer, and feedback and a rating if the employer has chosen to provide them.
20 For further information on platform features, refer to Agrawal et al. (2013a).
21 During the eight years prior to 2014 on oDesk, teams of two to three contractors have grown from 10 per month
to more than 5,000 per month, and in mid-2012, there were almost 20 teams of at least 64 on the site (Ipeirotis, 2012).
Work teams can enhance productivity in these markets, for instance by allowing workers to further specialize andshare ideas (e.g., Hamilton et al., 2003; Jones, 2011). As employers increasingly outsource knowledge-intensive jobs
through digital platforms, the prevalence of international work teams will likely continue to grow.

10task.22 In addition, because I am interested in testing the coordination and communication costs
associated with national diversity in teams, free-riding on the assigned task should be difficult.
The task also needed to be consistent with the types of tasks posted on oDesk so that contractors
did not become suspicious about the purpose of the job.23 Moreover, an objective evaluation ofcontractor performance was necessary. Finally, it must have been possible to complete the task
remotely. Given these constraints, I developed a web development task that required both backend (PHP) and front-end programming (Javascript) to assign contractors hired for the experiment.
Hired contractors were asked to add a list of features in these languages to existing code. This issimilar to a web development task for which a group of workers are responsible for both the design
and functionality of a web page.
To reinforce the collaboration aspect of this job and to reduce free-riding in teams (Holmstrom,1982), I hired one contractor in each pairing to complete the Javascript portion of the task andanother to complete the PHP portion.24 I assigned each pair three features to add to the code,
one that required only Javascript programming, one that required only PHP programming, andone that required both.25 Including both individual tasks and a team task accomplishes two objectives. First, it allows for both independent and for team work so that neither of the organizational
form treatments lead to contractor frustration.26 Second, it allows me to disentangle difficulties
associated with collaboration from difficulties associated with the job in general. All hired contractors received the same list of features to be added, and I instructed them to work on the featuresthat corresponded to the language for which they were hired. I display the instructions provided
to contractors in Appendix B. Nothing in the instructions or the task design explicitly prevents
contractors from working on all three features of the task, including the parts that are not in thelanguage they were hired for. The reasons a single contractor may not work on both languages are
first, that some contractors are only familiar in coding one of the two languages, and second, thatthey have been asked to focus on one of the two languages. Importantly, the feature that requires
both programming languages to be completed requires that the codes from each language work
together. A contractor who only knows one of the two languages would not be able to complete
this feature on his or her own. Therefore, contractors in the independent work treatment would not
be able to complete all three features unless they are familiar with both PHP and Javascript.
22 During a pilot test of the experiment, contractors were giving a job that only had collaborative tasks (i.e. tasks

that required both JavaScript and PHP to be completed). Those in the independent work treatment complained quite a
bit about the task being unrealistic for them to work on without being able to communicate with their pairmates.
23 This was to minimize bias caused by contractors performing differently than they would in real labor market
situations. For instance, if contractors believed they were being observed for the purposes of a research study, they
may have tried harder than they normally would have to complete the task or to behave in socially desirable ways (e.g.,
Levitt and List, 2007).
24 The team rooms further reduce the potential for free-riding because contractors are aware that their individual
performance can be monitoring by employers through the team room application.
25 An aspect of the task that I had not taken into account prior to running the experiment is the script all three features
were to be added to was PHP-based. As a result, it turned out that some PHP knowledge was also important for adding
the Javascript feature to the script.
26 For instance, if the job only required a joint task, the contractors in the independent work treatment may be
confused as to why the job was designed the way it was. Similarly, if the job only included independent tasks,
contractors in the team treatment may wonder why they had been asked to work in a team.

11

In order for the contractors in the teamwork condition to be able to work with each other, I gavethem a total of eight hours to complete the task; they had to work these hours within the same
period as the other contractors in their groups.27

2.3

Contractor Pair Composition

I randomly assigned each hired contractor to one of four types of groups of two, and all groups weremade up of one contractor hired to work on the Javascript code and one to work on the PHP code.
As Figure 1 demonstrates, the experiment had two treatments: pairs were either from different
countries or not and were either permitted to work in teams or not. Pairs in the team treatment
worked in the same team room as each other, and those in the independent work treatment worked
in separate team rooms and were unaware of who their pair mate was so that team work was
not an option. The purpose of this experimental design is to compare the benefits of teamwork
in homogeneous teams with the benefits of teamwork in nationally diverse teams. This allows
me to identify how organizing workers into teams compares with organizing them as independent
workers, and how this is affected by national diversity.
Figure 1: Experiment Design

Notes: This matrix reports the four experimental conditions.

To control for country-specific differences in contractor quality, I limited the number of countries
from which I hired. Based on information about the set of applicants my job postings attracted
during the pilot phase of my study, I included English speaking contractors from India, Pakistan,
27 Contractors had between midnight UTC one day until midnight EST the next. During a pilot of this project, it

became clear that restricting contractors to work within a single 8 hour period was unrealistic. Giving contractors
about a day to finish the job is consistent with many of the jobs on oDesk and still gave contractors the chance towork with their teammate if they wanted to, particularly given that there was very little variation in time zones acrosscontractors in my sample. oDesk contracts automatically begin at midnight UTC on the start day specified in thecontract, and because contractors were aware that the employer time zone was EST (this information was posted on
my employer profile), to minimize confusion the deadline was midnight EST.

12

and Bangladesh in the experiment.28 Contractors from these countries frequently applied to my job
postings and bid an amount that was within the hourly wage criteria. Moreover, workers in thesecountries have very similar time zones making it easier to allow for remote team work among
them. While these three countries are similar in many respects - until 1947, all three were part ofIndia - there are also important differences between them that may result in, for example, different
knowledge sets and communication styles.29 These differences are discussed in more detail in
section 4.

2.4

Hiring Process

Using an employer account on oDesk, I attracted contractor bids by posting two job types. One
type of job posting asked for bids from contractors able to code in PHP and the other for bids
from contractors able to code in Javascript. For each pair in my sample, one PHP job and one
Javascript job was advertised. Contractors therefore selected into the programming language they
preferred. To minimize attrition among hired contractors, the job postings described the typeof work the task required, the date the work needed to be done on, and the number of hours
contractors had to complete the task. The job postings also specified that an hourly wage contract
was being offered30 and the maximum bid that would be accepted ($4.00 USD).31 To avoid bias
due to contractor selection into job applications, the job postings did not mention that the work
would be completed in teams nor did they mention anything about country-specific requirements.
I provide screenshots of the Javascript and PHP job postings used for the experiment and further
details about the postings in Appendix B. Applicants chose which job to apply for, either Javascript
or PHP, however, some applicants are knowledgeable in both languages. It therefore seems likelythat applicants applied to the job that required the language that they are most comfortable codingin.
The first applicant to each job posting who bid at most $4.00 and who was from one of the countries
28 In the independent work, no national diversity treatment, 34 workers are from Bangladesh, 38 are from India, and8 are from Pakistan. In the independent work, national diversity treatment, 22 are from Bangladesh, 34 are from India,
and 26 are from Pakistan. In the team work, no national diversity treatment, 26 workers are from Bangladesh, 52 arefrom India,and 2 are from Pakistan. In the team work, national diversity treatment, 30 workers are from Bangladesh,
28 are from India, and 24 are from Pakistan.
29 The education system in each country is overseen by their respective governments, and the curricula in the countries differ (National Curriculum & Textbook Board, Bangladesh, 2013; Ministry of Human Resource Development
Government of India, 2013; Islamabad, 2013). Moreover, Hofstede (2013)’s measures of labor market culture suggests noticeable differences across the countries, particular in terms of their uncertainty avoidance, individualism, andpower distance measures.
30 This is to ensure contractors perform their work while logged into the team room. Hourly wage contracts on
oDesk guarantee payment to contractors for all hours worked as long as the hours are performed in the team room.
Fixed price contracts do not guarantee payment so there is less incentive to perform work while logged into the teamroom.
31 oDesk charges 10% of each transaction on the site so a $4.00 bid from a contractor’s perspective shows up as a
$4.44 bid from an employer’s perspective.

13

included in my experiment received a list of interview questions. The purpose of the questions wasto get an idea of the level of Javascript and PHP knowledge each contractor had, their English
language abilities, and the countries they have lived in. The interview text sent to Javascript andPHP job interviewees is in Appendix B. I gave each interviewee two hours to reply to the interview
questions before I interviewed the next applicant who met the bid and country requirements. I
hired the first interviewee to reply with the exception of interviewees who did not provide pertinentanswers due to their lack of English language ability.32 Some contractors applied for both jobs,
but were hired for the task in which they met the hiring requirements.

2.5

Job Completion

Once hired, contractors were sent the appropriate instructions and the file with the code to beedited. There were four versions of the job instructions to reflect whether the contractor was hired
for the Javascript or the PHP portion of the job and whether pairs were permitted to work as a teamor not. Instructions do not vary across the national diversity treatment. I provide the four different
versions of the instructions in Appendix B.
In addition to describing the features to be added to the code, the instructions noted the timeline
for the task and the country that contractors’ co-worker lived in (i.e. the country of residence ofthe other contractor in the pairing). I included contractors’ pair-mate’s country of residence in thetask instructions because it is not possible to restrict access to this information in the team work
treatment, so I controlled for this knowledge across treatment groups to ensure that it was not
driving my findings. The instructions asked contractors to note what they were working on whilein the team room and to include information on what they had completed when they turned in theirwork.
I asked contractors who had not turned in their work by the deadline to submit any work they had
completed. Once contractors had turned in their work or after the deadline had passed, I asked
them whether they would be willing to answer a few questions about the job for a $0.50 bonus.
The purpose of the survey is to obtain a measure of how well contractors think they did on the job
and their perceptions on teamwork. Once contractors had completed the survey or indicated thatthey did not want to complete it, their contracts ended. I provided feedback and ratings based oncontractors’ output to all paid contractors.33
32 For instance, some interviewees replied with text unrelated to the questions and others provided answers to thequestions that were not comprehensible.
33 Because ratings are weighted by the amount a job pays on oDesk, contractors who earn $0 on a job cannot be
rated by employers.

14

3

Data and Estimation Methodology

3.1

Overview of the Data

I collected data between January 2013 and June 2013. In total, I hired 324 contractors, who madeup 162 pairs.34 There are 80 contractors and 40 pairs in the nationally homogeneous teamwork
and independent work treatment groups,35 and 82 contractors and 41 pairs in the nationally diverse
teamwork and independent work treatment groups.36
For each hired contractor, I collected information provided on their profile pages including theirwork histories on and off oDesk, education, oDesk test scores, and advertised wages. I also
recorded the number of examples of Javascript and PHP work they provided in their interview
responses as well as the amounts they bid on my jobs. For each job posting, I recorded the number
of applicants and the amount of money I had spent as an employer on the site up to that point.
After contractors completed their work or once the deadline had passed, I recorded informationon the number of features they added to the code, both with and without error, the amount oftime they spent working on the task, the difference between the number of features they reported
having added and the number they actually had added, which features they attempted to add, andthe total amount they were paid for the hours worked. In addition to these performance outcomes,
I collected information on contractor effort. Specifically, I recorded whether or not contractors
attempted to implement each of the three features in the task, and how their effort levels (measured
by oDesk using contractor mouse and keyboard activity) evolved over the course of the job. Table
1 describes these outcome variables, the key independent variables and the contractor and job
descriptive variables.
I present summary statistics of hired contractor-pair characteristics in Table 2. I measure eachvariable as the average between the two contractors in each pair. It is worth noting that hired
contractors were, on average, relatively inexperienced on oDesk given that about 60% of them had
never received a rating on the platform prior to being hired (though many of those without a rating
had been hired once or twice on the platform),37 that the average bid on the job was lower than
the average wage contractors indicated they would work for on their profiles, that more than 85%
34 In 9 of the pairs, at least one of the contractors did not contact me again after receiving the instructions. I havecoded these contractors as not having completed any of the work. However, given that there might be reasons fordisappearing other than their ability to do the work, I check whether the results are robust to excluding these pairs, andto assigning them the sample average performance (see Appendix A).
35 As discussed in Section 2, contractors assigned to pairs in the independent work treatment work in separate
team rooms from each other. These contractors were not aware of who their pair-mates were, and were not able tocommunicate with them.
36 The difference in the number of observations across groups is a result of some groups taking longer to meet theobservations requirement than others.
37 The inexperience of contractors in this study is liklely due to the relatively low wage I offered for a job that
requires some specialized skills (Agrawal et al., 2013b).

15

of hired contractors were male, and that the average hired contractor had a Bachelor’s degree. I
present summary statistics of pair outcomes in Table 3. Here it is worth noting that the average pair
did not work the full 16 hours given (eight hours per contractor). This could be because contractors
are incentivized by both the financial returns to the job and the potential reputational returns. In
particular, contractors on oDesk receive feedback and a ratings score once they have completed ajob, and they may believe that working fewer hours will result in better feedback. Alternatively, it
could be because contractors on oDesk can only work on one hourly wage job at a time, and they
may have decided that their time was more valuable spent on another task. It is also

16

Table 1: Variable Definitions
Variable
Dependent Variables:
Joint Output
Joint Productivity
Individual Output
Individual Productivity
Difference between Reported and Completed
Attempt Javascript Feature
Attempt PHP Feature
Attempt Combined Feature
Reported Doing More Work than Teammate

17

Willingness to Work with Teammate Again

Independent Variables:
National Diversity
Team Work

Description
Number of non-overlapping features added to code by the Pair
Number of non-overlapping features added to code by the Pair divided bynumber of hours worked
Number of features added to code by the Contractor
Number of features added to code by the Contractor divided bynumber of hours worked
Absolute difference between what contractors reported ascompleted and what was actually completed by the Pair
Equal to one if at least one Contractor in the Pair attempts to add
the feature that requires Javascript to the code, zero otherwise
Equal to one if at least one Contractor in the Pair attempts to add
the feature that requires PHP to the code, zero otherwise
Equal to one if at least one Contractor in the Pair attempts to add thefeature that requires both Javascript and PHP to the code, zero otherwise
Contractor response to survey question "Did you or your teammate do morework on this project?" Response range: 1 (My teammate did almost all of the work)
to 7 (I did almost all of the work)
Contractor response to survey question "Would you prefer working withyour teammate from this task or someone else on another project?"
Response range: 1 (I would prefer working with someone else) to 7
(I would prefer working with my teammate from this task)

Indicator for Pairs withDifferent Javascript Knowledge
Indicator for Pairs withDifferent PHP Knowledge

Equal to one if Contractors in the Pair are from different countries, zero otherwise
Equal to one if Contractors in the Pair are permitted to work as a team,zero otherwise
Equal to one if at least one Contractor in the Pair has knowledge of a relevant
skill (i.e., Javascript or PHP) that their co-worker does not have, zero otherwise
Equal to one if only one Contractor in the pair has knowledgeof Javascript, zero otherwise
Equal to one if only one Contractor in the pair has knowledgeof PHP, zero otherwise

Outcome Descriptives:
Total Hours Worked
Amount Paid for Hours Worked

Total hours worked by Pair on job
Total amount paid to Pair for job

Skill Differences

Contractor and Job Descriptives:
Number of Job Applications
oDesk Rating
No oDesk RatingoDesk Experience

Number of Contractors who applied to a job posting
Job size weighted feedback score out of five provided by prior oDesk Employers
Equal to one if Contractor has no oDesk rating at time of hiring,zero otherwise
Number of contracts Contractors have been hired to complete on oDesk at timeof hiring

Profile Picture
Education
Number of Non-oDesk Jobs Reported
Average oDesk Test Score
Number of oDesk Tests
Wage Bid
Advertised Wage on profile
FemaleEmployment Agency Member

Equal to one if Contractor has a profile picture, zero otherwise
Measurement of highest level of education. Equal to one for College Diploma, twofor Bachelor’s Degree, three for Master’s Degree, four for Doctorate, zero otherwise
Number of non-oDesk jobs reported on profile
Average score out of five on oDesk tests taken
Number of tests taken on oDesk
Amount Contractor bid on job posting
Wage Contractors post on profile pages as amount they are willing to work for
Equal to one if Contractor is female, zero otherwise
Equal to one if Contractor belongs to an oDesk employment agency, zero otherwise

Number of portfolio Items

Number of items in Contractor’s profile page portfolio

18

Table 2: Pair Characteristics Summary Statistics
Pair Averages

Mean(Std. Dev.)

Number of Job Posting Applications
oDesk Rating Prior to HireNo Rating Prior to Hire
Number of oDesk Contracts Prior to Hire
Indicator for having a Profile Picture
Level of Education
Number of Offline Jobs Listed on Profile
Average Score on oDesk Tests
Number of oDesk Tests Taken
Wage Bid on the Job
Wage Posted on Profile
Indicator for Female Contractor
Indicator for Agency Membership
Number of Items in Portfolio
Indicator for Pairs with Different Javascript Knowledge
Indicator for Pairs with Different PHP Knowledge
N

8.218
4.577
0.611
4.213
0.843
1.846
1.191
3.428
2.509
3.759
6.888
0.145
0.253
3.87
0.329
0.360

(3.18)(0.66)(0.37)(7.466)(0.27)(0.688)(0.643)(0.422)(2.283)(0.607)(3.543)(0.253)(0.312)(4.806)(0.471)(0.481)162

worth noting that the majority of pairs attempted to implement the Javascipt and PHP features butthat only 33% of pairs attempted the combined feature. This suggests contractors perceived thisfeature as more complex, perhaps because it requires both programming languages to be implemented and, therefore, relies more heavily on teamwork.38
To verify the randomness of the treatments across pairs, Table 4 presents hired contractor-pair characteristics across the four treatment groups. A multivariate analysis of variance test of equality of
the four group means indicates that there are no statistically significant differences across the fourgroups. Table A1 compares hired contractor-pair characteristics across the teamwork treatment (inPanel A) and across the national diversity treatment (in Panel B). Given that I randomly assigned
pairs to treatment groups, characteristics should be statistically the same across the groups and,with one exception, that is the case here. The exception is the number of oDesk tests taken acrossthe national diversity treatment. This measure is statistically different at the 10% level between thetwo groups. However, the medians between the two groups are identical.
Figures 2 and 3 compare pair outcomes across treatment groups. Figure 2 compares the number offeatures implemented by pairs that worked independently and those that worked in teams. The figure also separates the teamwork treatment by the national diversity treatment in order to compare
the treatments of interest. These averages show that teamwork significantly improves outcomeswhen team members are from the same country and significantly reduces output when team mem38 The three features in the task were designed to be equally difficult for programmers who are experts in both PHP

and Javascript.

19

Table 3: Pair Outcome Summary Statistics
Pair Averages

Mean(Std. Dev.)

Team Total Amount Paid
Team Total Number of Hours Worked
Number of Features Implemented
Number of Features Implemented Divided by Hours Worked
Difference between Actual and Reported Features Added
Attempt Javascript Feature
Attempt PHP Feature
Attempt Combined Feature
No Attempt
Increasing Effort
Teammates Worked on the Same FeatureN

35.555
9.35
1.068
0.131
0.327
0.920
0.821
0.327
0.056
0.364
0.179

(20.336)(5.123)(0.773)(0.164)(0.555)(0.273)(0.385)(0.471)(0.230)(0.483)(0.385)162

bers are from different countries. These effects are economically significant as well. In particular,
teamwork improves output for nationally homogeneous pairs by 38% (p-value 0.04) relative to nationally homogeneous independent contractor pairs and reduces output for nationally diverse pairs
by 30% (p-value 0.03) relative to nationally diverse independent contractor pairs.
Figure 2: Output by Treatment

Figure 3 compares the number of features implemented divided by the total number of hours
worked by pairs and shows the same pattern, that teamwork increases productivity when teammates are from the same country and decreases it when they are from different countries. Again,
these effects are economically significant. Teamwork increases the productivity of nationally homogeneous pairs by almost 90% (p-value 0.04) relative to nationally homogeneous independent
contractor pairs and decreases the productivity of nationally diverse pairs by more than 50% (p20

Table 4: Pair Characteristic Summary Statistics Across Treatment Groups

Variable
Number of Job Posting
Applications
oDesk Rating Prior to
Hire
No Rating Prior to
Hire
Number of oDesk Contracts
Prior to Hire
Indicator for having a
Profile Picture
Level of Education
Number of Offline Jobs
Listed on Profile
Average Score on oDesk Tests
Number of oDesk Tests Taken
Wage Bid on the Job
Wage Posted on Profile
Indicator for Female Contractor
Indicator for Agency Membership
Number of Items in Portfolio
Indicator for Pairs withDifferent Javascript Knowledge
Indicator for Pairs withDifferent PHP Knowledge
Number of Observations

No
National Diversity

National Diversity

No
Team
Team Work

Team
Work

No
Team
Work

Team
Work

7.900
(2.565)4.423(0.919)0.625(0.386)
4.775(8.068)0.850(0.280)1.925(0.622)1.200(0.810)3.500(0.379)2.238(1.862)3.734(0.685)
7.460(3.511)0.100(0.257)0.200(0.314)4.950(6.486)0.293(0.072)0.341(0.075)40

8.400(3.086)4.657(0.520)0.613(0.381)
2.475(3.699)0.875(0.245)1.825(0.784)1.200(0.513)3.427(0.536)
2.113(1.847)3.842(0.513)5.762(1.877)0.163(0.261)
0.263(0.318)3.588(3.506)0.350(0.076)0.350(0.076)40

8.805(3.239)4.631(0.448)0.646(0.373)
5.402(10.387)
0.780(0.315)1.817(0.752)1.122(0.519)3.340(0.348)2.817(2.359)3.724(0.578)7.385(4.439)0.159(0.259)0.256(0.297)2.914(2.737)0.366(0.076)0.415(0.078)41

7.768(3.660)4.589(0.650)0.561(0.337)
4.171(5.672)0.866(0.223)1.817(0.575)1.244(0.686)3.452(0.405)2.854(2.829)3.738(0.636)
6.933(3.594)0.158(0.234)0.293(0.314)4.049(5.398)0.310(0.072)0.333(0.074)41

p-value+
0.435
0.645
0.760
0.331
0.382
0.873
0.860
0.449
0.329
0.803
0.116
0.644
0.605
0.282
0.888
0.867

Notes: Standard deviations are in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%. +Test for equality of four group means using multivariate analysis of variance21

value 0.01) relative to nationally diverse independent contractor pairs.
Figure 3: Productivity by Treatment

These comparisons suggest that when a team is nationally homogeneous, coordination is easy
enough that teamwork outperforms independent work and that coordination when teammates arefrom different countries is sufficiently difficult that independent work leads to higher output andproductivity. Moreover, the findings suggest that complementaries are not high enough to compensate for the costs of diversity in this setting.
I collected the data from a randomized experiment; therefore the simple correlations reported here
can be interpreted as causal relationships. However, to further allay concerns about omitted variables, and to potentially increase precision, in the next section I estimate the effect of cross-country
teamwork on performance in a multivariate regression framework.

3.2

Estimation Strategy

The regression estimates derive from versions of the following linear model:
Yi = α + β1 TeamWorki + β2 NationallyDiversei ∗ TeamWorki +θ Xi + δCountryPairi + ψWeeki + εi (1)where Yi is a measure of pair i’s success, measured both as joint output (the total number of features
implemented by the pair) and joint productivity (the number of features added divided by the total
number of hours worked). NationallyDiversei is an indicator for whether or not pair i is made up
of contractors from two different countries, TeamWorki in an indicator for whether or not pair i
is working as a team, Xi is a vector of controls for the average characteristics between contractors
22

in pair i, CountryPairi is a fixed effect for pair i’s pair of countries,39 and Weeki is a vector ofbinary indicators for the week during which pair i worked. With the inclusion of country-pair fixed
effects, I estimate β1 and β2 by comparing the average performance of independent contractors
within a given pair of countries with the average performance of teams made up of contractors inthe same pair of countries.

4

Results

I begin by presenting estimations of the effects of teamwork, pair diversity, and the interaction
between the two on performance, followed by estimates of how these coefficients differ depending
on how important teamwork is for a given pair. Specifically, I consider whether or not the task
being worked on requires both PHP and Javascript skills, and whether or not pair mates havespecialized skills. I provide several robustness tests of my findings, including evidence that national
diversity is not simply a proxy for ethnic or language diversity, or for geographic distance. I
then present results on possible explanations for these main findings. In particular, I explore thepossibility that communication is harder in diverse teams, that workers have more negative ex-ante
expectations about the performance of nationally diverse teams, and that workers differentiallydislike teammates who are from other countries.

4.1

Main Results

The results from estimating Equation 1, presented in Table 5, show findings that are consistent withthose presented in Figures 2 and 3. Columns 1-3 estimate the effects of teamwork and national
diversity on joint output, and Columns 4-6 estimate these effects on joint productivity. Columns
1 and 4 estimate the effects of teamwork and national diversity on performance without controls
or fixed effects, Columns 2 and 5 add country pair and week fixed effects, and Columns 3 and 6
add controls. Including the fixed effects and controls does not affect the estimated coefficients on
teamwork. I present the full set of estimated control coefficients in Appendix A. For the remainderof the paper, I focus exclusively on coefficients estimated with the full set of fixed effects andcontrols.

39 I include 3 contractor countries in the experiment, so there are six country pairings.

23

Table 5: Effect of Team Work & National Diversity on Output and Productivity
(1)

(2)

(3)

(4)

Joint Output
Team Work
National Diversity*Team Work
National Diversity
Country Pair & Week Fixed Effects
Controls(6)

Joint Productivity

0.375**(0.183)-0.716***(0.237)0.171(0.177)0.322*(0.180)-0.666***(0.242)0.318*(0.164)-0.669***(0.236)0.079**(0.037)-0.172***(0.050)0.084**(0.035)0.070*(0.036)-0.179***(0.053)0.072**(0.033)-0.174***(0.051)

No
No

Yes
No

Yes
Yes

No
No

Yes
No

Yes
Yes

0.014**

0.008***

0.003***

0.001***

162
1.062
0.200

162

162

162

0.265

0.070

162
0.135
0.228

Ho : Team Work+National Diversity*Team Work=024

Observations
Mean Dependant Variable Independent WorkR-squared

(5)

162
0.069

0.278

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency membership. Joint Output is the total
number of features added by an observation. Joint productivity is the total number of features added by an observation divided by the number of hours
worked on the task by the pair. The Ho : Team Work+National Diversity*Team Work=0 row reports the p-values of this test.
* significant at 10%; ** significant at 5%; *** significant at 1%

The coefficient estimates in Column 3 show that teamwork is beneficial for nationally homogeneous teams and harmful for nationally diverse teams; teamwork increases output by 30% relative
to the independent contractor sample mean of 1.06 for nationally homogeneous teams and decreases it by 33% for nationally diverse teams. The coefficient estimates in Column 6 suggest evenlarger effects for productivity. In particular, relative to 0.14 features per hour (the mean productivity of independent contractors) teamwork increases productivity by about 50% for nationallyhomogeneous teams and decreases productivity by about 75% for nationally diverse teams. For aclearer interpretation, I estimate the effects of teamwork national diversity on joint output using anordered logit regression. The results of this estimation are in Table A4. The estimates show thatteam work among nationally homogeneous pairs significantly decreases the likelihood of adding
no features, and significantly increase the likelihood of adding 2 and 3 features. The reverse is true
for nationally diverse pairs of contractors. It is worth noting that team work does not significantly
affect the number of hours worked on the job (see Table A5). The differences in productivity acrosstreatment groups is driven almost completely by the differences in output, and, therefore, in theeffectiveness with which different treatments groups used the same amount of time.
As the p-values for the test of whether the sum of the team work and interaction coefficients is equal
to zero demonstrate, team work leads to worse outcomes than independent work for nationallydiverse teams. This suggests that nationally diverse teams could have performed better than they
did simply by ignoring each other and working as independent workers. One explanation for why
this is occurring is that contractors dislike people from other countries and gain more utility fromharming a teammate from another country than they do from the pay-offs of performing well on
the task.40 However, as I show in section 4.2.3, this does not appear to be the case. An alternative
explanation is that contractors in nationally diverse teams lose efficiency because of coordination
problems and are not aware that this is occurring. I provide evidence in section 4.2.2 consistent
with this latter hypothesis.

4.1.1

Robustness of Baseline Estimates

In addition to team-based measures of performance, I also collected data on individual contractor
performance. Individual contractor performance is measured as the number of features a contractor added and the number of features per hour worked the contractor added.41 I estimate Equation
1 with individual output and individual productivity as the dependent variables and present theresults in Table A9. The results show that teamwork significantly improves individual output forcontractors in nationally homogeneous pairs but does not significantly impact their productivity.
Team work significantly reduces both output and productivity for contractors in nationally diverse
pairs. The size of the coefficients in Table A9 relative to the sample mean performance are com40 In this case, the primary pay-off from good performance is the reputational boost contractors receive throughratings and feedback. They may also anticipate that there is a possibility of being re-hired for a subsequent job.
41 This is distinct from team performance because if a given feature is added by both contractors in a pair, it counts
once towards team output.

25

parable to the size of the coefficients in Table 5. Given that the only difference between individual
and team level measures of performance is whether or not duplicate feature completions withinpairs get counted once or twice, this finding suggests that teamwork does not have a large effect onwhether pair members complete overlapping features or not.
I also test the effect of national diversity on team work by restricting the sample to those pairs in
the team treatment. The results are presented in Table A10. The estimates show a sizable negative
effect of national diversity on team performance that is consistent with the estimates on the fullsample of pairs.
To ensure that national diversity is not acting solely as a measure of geographic distance, I test
whether including the geographic distance in kilometers between pair-member cities eliminates
the effect of national diversity on performance. This analysis is restricted to contractors for whom
I was able to collect precise city-location data for.42 These results are reported in Table A11. As
these results show, geographic distance does not have a significant effect on joint output or productivity once national diversity is included in the regressions. In addition, though some statisticalsignificance is lost (perhaps due at least in part to the smaller sample size), including geographic
distance does not eliminate the effects of national diversity.
National diversity may also be acting as a proxy for ethnic diversity which also varies within country. To test whether this is the case, or whether it is capturing something that varies specificallyat the national level I perform several tests. First, given that India is the most ethnically diverse
country in my sample (e.g. Fearon, 2003), I test whether team organization among Indian contractors performs worse than among Pakistani or Bangladeshi contractors. Second, I test whether,conditional on having two contractors from India in a pair, teams with one contractor from Southern India and one from Northern India perform worse.43 These results are presented in Tables A6
and A7. Consistent with the notion that what is driving performance differences across teams is at
the national level, I do not find that Indian teams performance worse than Pakistani or Bangladeshi
teams, nor do I find that teams of contractors from North and South India perform worse than thosefrom the same region of India.
To further test whether shared or diverse ethnicities drive my main findings, I test whether teams
with one contractor from the Punjab State in India and one from Pakistan and teams with one
contractor from the West Bengal State of India and one from Bangladesh suffer less from theirnational diversity than other nationally diverse teams.44 I find no evidence that these teams performdifferently than other nationally diverse teams (see Table A8). However, only 5% of the teamsample is made up of these similar pairs.45
42 Some city names do not identify a unique city in contractor countries.

Contractors from these cities are notincluded in this analysis.
43 Northern and Southern India are arguably culturally quite distinct (e.g. Dyson and Moore, 1983).
44 These regions are more similar to one another than other cross-country regions in my sample. For instance,
Punjabi is spoken in both the Punjab State of India and in Pakistan (CIA, 2016b; Government of Punjab, 2016) andthat Bangla is spoken in both West Bengal and in Bangladesh (CIA, 2016a; UNICEF, 2016).
45 An additional test would be whether religious differences in teams affect my results. However, in my sample,

26

Lastly, although I hired contractors who speak English and communicated with them exclusively inEnglish, contractors in homogeneous teams may benefit because they are able to speak in their native language. Anecdotal evidence from team room screen shots suggests homogeneous teams did
not primarily communicate in their native languages. Of the eight observed conversations within
nationally homogeneous teams, six were conducted completely in English and two were conductedin a mix of English and another language.46 Moreover, the evidence that teams of contractors from
North and South India perform no worse than teams of contractors within similar regions in India
and that teams of contractors from similar regions across countries perform no better than thosefrom more ethnically distinct regions (see Tables A7 and A8) also suggest language difficulties are
not driving my results.

4.1.2

Team Collaboration

Table 6 shows the coefficients from estimating Equation 1 with an indicator for whether or noteach feature included in the task was implemented. Columns 1 and 2 present the estimated coefficients of the effect of teamwork for nationally homogeneous and nationally diverse pairs ofcontractors on the likelihood of implementing the Javascript and PHP features, respectively. These
results show that teamwork had more of an effect on the implementation of the Javascript featurethan the PHP feature for which teamwork had no significant effect. The findings reported in Column 1 are not what I expected. In particular, the Javascript feature was designed to only require
Javascript knowledge to be implemented, and therefore, I did not anticipate that it would dependon teamwork. The reason I believe that it does appear to be affected by teamwork is because ofan unanticipated attribute of the task. In particular, although the writing of the Javascript feature
only required Javascript knowledge, the script that the feature was to be added to is PHP-based.
As a result, contractor pairs may have benefited from knowledge of PHP when determining wherein the script to implement the feature.
Column 3 presents the estimated coefficients of the effect of teamwork for nationally homogeneous and nationally diverse pairs of contractors on the likelihood of implementing the featurethat requires both Javascript and PHP. These results show that teamwork significantly increases
the likelihood that the combined feature will be implemented when pairs of contractors live in thesame country and significantly decreases the likelihood of implementation when contractors in apair are from different countries. Conditional on my reasoning for why teamwork matters for theJavascript feature being true, these results suggest that suggest that teamwork has a larger effect on
performance when two types of knowledge are required and, therefore, when coordination is more
important.
The findings in Table 6 suggest that teamwork has a large impact when collaboration is more important. It follows then that teamwork will be most important when contractors in a pair specialize
there is not enough variation in religion measured by contractor last names across countries to perform this test.
46 All observed nationally diverse team communication was in English.

27

Table 6: Effect of Team Work & National Diversity by Task Feature(1)
Javascript
Feature(2)
PHP
Feature(3)
Combined
Feature0.272**(0.110)-0.349**(0.161)-0.130(0.104)-0.054(0.148)0.165***(0.059)-0.274***(0.090)

Ho : Team Work+National Diversity*Team Work=00.014**

0.747

0.002***

Observations
Mean Dependent Variable Independent WorkR-squared

162
0.568
0.225

162
0.444
0.314

162
0.074
0.240

Team Work
National Diversity*Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls and fixed effects includedin these regressions are equivalent to those included in Table 5. The dependent variable is equal to one if the feature
specified in the column headers was successfully implemented, and zero otherwise. The Ho : Team Work+National
Diversity*Team Work=0 row reports the p-values of this test. * significant at 10%; ** significant at 5%; ***significant at 1%

in one of the two skills required for the task (e.g., when one member knew Javascript but not PHP
and the other knew PHP but not Javascript). Testing whether this is the case helps clarify whether
collaboration is driving the main results. In addition, it provides a test of whether skill diversity inteams changes the effects of national diversity which contributes to our understanding of whether
skill specialization exacerbates or improves communication difficulties. I do this test by estimating
Equation 1 separately for pairs with skill differences and those without any. I present the resultsof this estimation in Table 7. The estimates in Table 7 confirm that the costs of teamwork for nationally diverse pairs are highest when contractors have different skill sets. The coefficients on theinteraction term in Columns 1 and 2 are significantly different at the 5% level and the interaction
term estimates in Columns 3 and 4 significantly different at the 15% level.47 Similar findings using
interactions between the skill differences, national diversity, and team work variables are presented
in Table A12.

4.2

Interpretation

In this subsection, I consider three explanations for my findings. In particular, I explore the data
to determine whether differences in communication costs can explain the output and productivity
47 The coefficients on the estimated effect of teamwork for nationally homogeneous pairs are higher with skill dif-ferences but not significantly so (p-value=0.18 when output is the dependent variable, p-value=0.35 when productivity
is the dependent variable).

28

Table 7: Effect of Team Work & National Diversity on Performance by Pair Skill Differences(1)(2)
Joint Output
No Skill
Skill Difference
Difference(3)(4)
Joint Productivity
No Skill
Skill Difference
Difference

0.059(0.234)-0.277(0.372)0.436(0.262)-1.062***(0.328)0.045(0.036)-0.109*(0.057)

0.092*(0.053)-0.228***(0.085)

Ho : Team Work+National Diversity*
Team Work=0

0.547

0.008***

0.083*

0.010***

Observations
Mean Dependent Variable Independent WorkR-squared

75
1.083
0.517

87
1.044
0.437

75
0.132
0.550

87
0.137
0.310

VARIABLESTeam Work
National Diversity*Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls and fixed effects includedin these regressions are equivalent to those included in Table 5. A pair has a skill difference if the individuals in thepair have different knowledge of Javascript and/or PHP. The Ho : Team Work+National Diversity*Team Work=0 row
reports the p-values of this test. * significant at 10%; ** significant at 5%; *** significant at 1%

differences. I also test for evidence of dislike for national diversity, and for negative ex-ante expectations about the performance of nationally diverse teams as a mechanism for my results. I findsuggestive evidence in support of the former explanation, and no evidence in support of the latter
two.

4.2.1

Communication

One possibility for differences in performance across the treatment groups is that the costs ofcommunication differ for nationally homogeneous and nationally diverse teams. Although thecountries included in my experiment may be more similar to each other than many other countries
and all contractors speak English, communication barriers likely remain. For example, Pakistan,
India, and Bangladesh were officially a single country until 1947, but citizens began calling forseparation well before then (Khan, 2007; Thursby, 1975). Importantly, while the drawing of borders between the three countries was arguably arbitrary, a significant amount of migration basedon employment opportunities, and cultural and political preferences occurred between the regions
following separation (Khan, 1974; Robinson, 1989).48
48 Historians maintain that important societal and cultural differences exist between the three countries, and that thesedifferences have been reinforced through periods of discord. For example, Robinson (1989) suggests the existence ofa “...winner-take-all atmosphere of the post-independence period in [Bengladeshi political culture] with its emphasison extreme individualism.” Thursby (1975) writes that “toward the end of the nineteenth century in northern India
the lines of religion, language, and script were becoming established between Hindus and Muslims.” There is also29That communication difficulties are causing poor performance in cross-country teams is consistent
with the findings on feature completion and skill specialization reported in the previous subsection.
In particular, these results demonstrate that cross-country team performance suffered significantly
more when collaboration, and therefore communication, was more important.49
To further investigate whether communication costs differ for nationally homogeneous and nationally diverse teams, I estimate Equation 1 with the difference between what contractor pairs
reported as having implemented and what was actually implemented as the outcome variable. At
the completion of the task, contractors are required to report which features are completed in thescript they turn in.50 This measure is a proxy for how successfully contractors communicated with
their teammates by measuring whether contractors were aware of what their teammate was able
to complete. This test is done on the sample of teams51 and the results are presented in Table
8. The estimates suggest that nationally homogeneous teams are better able to communicate thannationally diverse teams because the error in what contractors report as completed is significantly
higher in diverse teams than in homogeneous teams.
Although I do not observe a representative or full sample of team communication52 , the 16 nonrandom conversations that I do observe support communication being more difficult in nationallydiverse teams. Specifically, although I observe the same number of teams communicating in boththe nationally diverse and homogeneous treatments, the average number of observed words innationally diverse team chat logs is 111 and the average in nationally homogeneous chat logs is 63.
This suggests that nationally diverse teams spent more time trying to coordinate than nationallyhomogeneous teams.
Taken together, the evidence from task completion, skill specialization, misreporting, and chatlogs suggests that communication is more difficult for nationally diverse teams. More difficult
communication requires more time, which can harm performance by shifting time invested in theempirical evidence that these differences show up in labor markets. For instance, India and Pakistan differ significantlyin their human resources management practices (Aycan et al., 2000). Measures of labor market cultural distance also
show large differences between Bangladesh, India, and Pakistan on several dimensions (Hofstede, 1983).
49 An alternative but related explanation for the finding that skill specialization worsened the performance of crosscountry teams is that knowledge of a particular skill set includes knowledge of a type of language. When contractors
share a skill, they also share knowledge of how to communicate about the skill and this may substitute for othercommunication barriers. However, findings that skill differences benefit nationally homogeneous teams suggest collaboration within teams with specialized skills is likely more intensive relative to collaboration between contractors
with a shared skill.
50 It is not clear whether contractors understood the request to report what they had completed as requesting theirindividual addition or the joint addition. However, given the difference in misreporting across the team and independent work treatments, it appears that contractors in the two treatments did interpret the request differently. Moreover,even if contractors in the team treatments decided to report their individual additions, this may still provide a measureof miscommunication if they incorporated advice from their teammate into their individual additions.
51 The sample is restricted to teams because pairs of independent contractors cannot communicate.
52 Screenshots are only taken every 10 minutes, and contractors receive a warning before a screenshot is taken sothey can decide what is displayed in the pictures. In addition, conversations seem to be concentrated within specifictime periods. As a result, communication data from screenshots is sparse and complete conversations are almost neverobservable.

30

Table 8: Effect of Team Work & National Diversity on Task Reporting Accuracy(1)
Difference between Reported
and Completed
National Diversity

0.349*(0.191)

Observations
Mean Dependent Variable National
Homogeneous Teams
R-squared

81
0.241
0.385

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls and fixed effects includedin these regressions are equivalent to those included in Table 5. The sample is restricted to teams. * significant at
10%; ** significant at 5%; *** significant at 1%

task towards communication and away from production. This is consistent with the finding that
discussed in section 4.1 that, on average, homoegenous and diverse teams spend the same amountof time on the task however diverse teams use this time less effectively. Moreover, given thatnationally diverse teams perform worse than independent pairs of workers, these teams do notappear to realize the productivity loss attempting to coordinate causes. Tests of whether nationallydiverse teams have different ex-ante expectations or ex-post beliefs about their performance thanhomogeneous teams do in the next two sections support this interpretation.

4.2.2

Performance Expectations

An alternative explanation to communication difficulties for the poor performance of nationallydiverse teams is that they had different expectations about the performance of their team going
into the task. For instance, they may have believed that they would not be able to work well withsomeone from another country and, as a result, their performance may have reflected this belief(Schmader et al., 2008). Alternatively, they may have believed that someone from another country
would not be able to do a good job on the task, and was therefore not worth trying to work withalthough anecdotal evidence from chat logs does not support this possibility.
To test whether nationally diverse and homogenous teams had different ex-ante expectations about
their performance, I test whether the intensity of effort exerted on the task from the outset is different across the two team types. To do this, I code the average effort level for every ten minute period
across the total amount of time each team worked on the job. Effort levels are measured on oDesk
through activity meters which measure mouse and keyboard use on a scale from one to ten. Figure
4 shows polynomials of average team effort levels over time contractors in nationally homogeneous
teams, and those in nationally diverse teams. The figure demonstrates that the national composition31

of teams does not appear to affect effort levels at the point when the job is started. This suggeststhat nationally diverse and nationally homogeneous teams start the job with the same expectations
about the returns to their effort despite knowing which country their teammate was from before
beginning the task. At about 50% of the way through the job, however, nationally diverse teameffort begins to fall below that of nationally homogeneous effort suggesting that communicationdifficulties may have slowed these teams down as time went on.53
In addition to this more formal evidence, anecdotal evidence from my interactions with contractors
suggests they did not did not have more negative expectations about the performance of nationallydiverse teams. In particular, I did not receive any complaints from workers about who they had
been paired with once they had learned which country their teammate was from. I did, however,receive complains and suggestions on other task requirements.
Figure 4: Effort Over Time by Team Treatment

Notes: This chart reports polynomials of average time effort levels over time across the team treatment groups.
Dashed lines represent 90% confidence intervals.

4.2.3

Animosity in Nationally Diverse Teams

Based on the structure of the task and of contractor incentives on oDesk, I have thus far assumed
that the incentives of the contractors in my study are aligned. One concern, however, is that they
may not be in diverse teams, for instance because contractors’ pay-offs change based on preferences for teammate nationality unrelated to communication difficulties and complementarities
53 This is consistent with theory that more difficult communication takes effort away from the task (Dessein andSantos, 2006), for instance because workers spend time waiting for each other to show up or to complete a portion of
the job, or because time is spent communicating as opposed to writing code. Mouse and keyboard activity is more
likely to be higher when workers are working on their code than when they are attempting to coordinate with theirteammates.

32

because of negative feelings towards people from other countries (Alesina and La Ferrara, 2005).
The average effort levels across teams demonstrated in Figure 4 suggest nationally diverse teams
begin the task with aligned incentives. However, I provide additional empirical tests of this explanation for my findings here.
I investigate whether there is any empirical evidence for this in the data by analyzing contractor
survey responses.54 I asked contractors in the teamwork treatment who agreed to answer the survey
questions whether they thought they had done more work than their teammates or vice versa (where
1 is “my teammate did almost all the work" and 7 is “I did almost all the work") and whether
they would be willing to work with their teammates from this task or would prefer a different
teammate for any follow-up tasks (where 1 is “I would prefer another teammate" and 7 is “I would
prefer this teammate"). Contractors knew that the employer was going to see these answers andtherefore could have used them to damage their teammates’ reputations or to make themselvesappear better. Table 9 presents results from regressions of the cross-country team indicator onthese survey questions.55 The results give no indication that contractors in cross-country teams
had a more negative view of their teammates or that they were less likely to want to work with
their teammates again. This also suggests that contractors in nationally diverse teams may nothave recognized the relatively poor performance of their teams.
Table 9: Effect of National Diversity on Opinion of Teammate(1)
Reported Doing MoreWork than Teammate(2)
Willingness to Work
With Teammate Again

National Diversity-0.067(0.324)0.598(0.382)

Observations
Mean Dependent Variable No National Diversity
R-squared

120
5.598
0.182

120
4.133
0.375

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls and fixed effects includedin these regressions are equivalent to those included in Table 5. Independent variables are collected through a survey.
* significant at 10%; ** significant at 5%; *** significant at 1%

These results are suggestive that contractors’ preferences for teammates based on their nationality
is not driving the results. However, the survey may not capture what contractors really thought
and the response rate is not 100%, so there may be some selection in who replied. Another way
to test for this mechanism is to restrict the sample to countries that are less likely to have feelingsof animosity towards each other. Most concerning in this regard are teammates from India andPakistan, given the current dispute between these countries.56 To test whether this dispute is driving
54 The survey response rate is 83%.
55 The results are restricted to the sample of contractors in the team treatment.
56 Hjort (2014) shows that when team members are from conflicting ethnicities, productivity suffers.

33the negative coefficient on the interaction between cross-country teams and teamwork, I estimate
Equation (1) excluding all pairs with at least one contractor from Pakistan. I present the resultsfrom this estimation in Table 10. The results in Table 10 are consistent with those in Table 5,57
and are not consistent with the negative effect of teamwork on nationally diverse pair performance
being driven by dislike for national diversity in teams.58
Table 10: Effect of Team Work & National Diversity on Performance, Pakistan Excluded(1)
Joint Output(2)
Joint Productivity

0.307*(0.178)-0.530(0.323)0.079**(0.035)-0.176***(0.061)

Ho : Team Work+National Diversity*Team Work=00.063*

0.004***

Observations
Mean Dependent Variable Independent WorkR-squared

108
1.059
0.325

108
0.121
0.330

Team Work
National Diversity*Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Controls and fixed effects includedin these regressions are equivalent to those included in Table 5. Pairs with at least one worker from Pakistan are
excluded. The Ho : Team Work+National Diversity*Team Work=0 row reports the p-values of this test. * significant
at 10%; ** significant at 5%; *** significant at 1%

5

Conclusion

As technology continues to facilitate international markets, collaboration between market participants from all over the world is becoming more common and multinational work teams are likely
to become increasingly necessary. Understanding the trade-offs associated with these teams has
important implications for employers, and workers. This paper considers what the value of teamwork is and how it varies with national diversity among contract workers using a field experimentin an international labor market to answer these questions.
Findings from the experiment show that allowing teamwork improves outcomes for contractors innationally homogeneous pairs but worsens outcomes for contractors in nationally diverse teams. In
particular, nationally diverse pairs perform worse when working as teams than they do when working independently. Moreover, teamwork has a more negative impact on outcomes for nationally
57 The statistical significance of coefficients in Table 10 is lower, likely due to the smaller sample size.
58 The results hold when I drop any one of the six country-pairs of contractors from the sample.

34

diverse pairs when team members have specialized skills suggesting that overlapping skills either
allows workers to avoid coordination, or improves their ability to communicate by providing ashared context on which to understand each other. Further investigation of the data suggests that
communication is more difficult for nationally diverse teams than it is for nationally homogeneous
teams, but that contractors are not aware of this. I find no evidence that animosity between workers
from different countries affects their performance or that nationally diverse teams begin the task
expecting to perform worse than nationally homogeneous teams.
It is important to note some boundary conditions of the analysis in this paper. First, teams had
eight hours to work on their tasks, and team members had no prior interactions. Therefore, theexperiment considers the impact of national diversity on the value of teamwork during the period
immediately after team members are first introduced. For longer term labor contracts, as teammembers spend more time together, contractors may learn how to deal with the communicationdifficulties that arise due to national differences. Second, the experiment restricts analysis to three
countries. The countries included are relatively similar compared to many other country pairs so
the results presented here may be a lower bound on the value of teamwork for cross-country pairs.
Third, the task assigned in this experiment has both routine and creative elements (e.g., Boudreau
et al., 2011), which reflects many common real-world tasks; however, it may not require the typeor extent of creativity that prior research has shown diverse teams excel at (e.g., creative generation
tasks). To the extent that the assigned task is not a task that benefits from diversity, this study canbe thought of as a test of the costs associated with national diversity in teams.59 Fourth, theseteams are not overseen and managed by an employer who helps to facilitate coordination. As priorliterature has shown, the success of diverse teams depends on how they are managed (e.g. DiStefano and Maznevski, 2000; Gong, 2003; Jarvenpaa et al., 1998; Kochan et al., 2003). Therefore,
the results in this paper provide estimates of the performance of teams in the absence of managerial intervention. Finally, communication encompasses a number of different elements includinginterpretation, trust, and knowledge (Kintsch, 1988; Rode, 2010). Understanding the causes ofcommunication failures in nationally diverse teams is an important area for future research.
The research I present in this paper contributes to the organizational and labor economics literatureby identifying the value of organizing workers in to teams separately for nationally diverse andnationally homogeneous pairs of contractors and by providing suggestive evidence that even in
the absence of taste-based discrimination, nationally diverse teams have difficulties coordinating.
These results build on theoretical research that considers the costs and benefits of team work whencommunication costs vary across possible teams (e.g. Dessein and Santos, 2006; Lazear, 1999). It
also contributes to literature on diversity in organizations by providing the first experimental testof the performance effects of national diversity in teams. Importantly, my experimental evidence
is consistent with national diversity capturing something other than ethnic or geographic diversity.
Furthermore, this paper has implications for research on immigrant labor market success. For instance, prior findings in this literature suggest that employers are less willing to hire immigrants
than equally capable native workers (Hunt, 2013). Consistent, with survey and observational ev59 However, if it is the case that diversity only benefits teams in cases of extreme task creativity, it is unlikely tobenefit many real-world teams.

35

idence (Bell, 1997; Leslie and Lindley, 2003; Oreopoulos, 2011, e.g.), the results presented heresuggest that some of this hesitancy may be a result of the costs of assimilating different nationalities
in the workplace.
The results presented in this paper also have important practical implications. In particular, there
are potentially large gains to cross-country collaboration, including knowledge transfer, market
growth, and access to higher paying jobs; however, the findings suggest that managers hiring froman international pool of workers should be cognizant of the costs of a diverse labor force andinvest in managing these differences.60 My findings suggest that one way for managers to reducethe costs associated with national diversity is to ensure teammates have another form of sharedknowledge. In addition, participants in international markets may benefit from investing in culturespecific human capital. Education policy may play a role in easing the costs of collaborating acrosscountries by standardizing some of the content of curricula across countries, and by providing
cultural training programs for international market participants.

6

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42

For Online Publication
Appendix A

Additional Tables

Table A1: Pair Characteristic Summary Statistics By Team Work and National Diversity
Treatments
Panel A
Variable
Number of Job Posting
Applications
oDesk Rating Prior
to HireNo Rating Prior
to HireNumber of oDesk Contracts
Prior to Hire
Indicator for having a
Profile Picture
Level of Education
Number of Offline Jobs
Listed on Profile
Average Score on oDesk
Tests
Number of oDesk Tests
Taken
Wage Bid on the Job
Wage Posted on Profile
Indicator for Female
Contractor
Indicator for Agency
Membership
Number of Items in
Portfolio
Number of Observations

No
Team WorkTeam Work

8.358(0.328)4.527(0.11)
0.636(0.042)
5.093(1.036)
0.815(0.033)1.87(0.077)1.16(0.075)3.416(0.044)2.531(0.239)3.729(0.070)7.422(0.329)0.13(0.029)0.228(0.035)3.92(0.562)80

8.08(0.378)4.62(0.083)0.586(0.040)3.333(0.542)0.87(0.026)1.821(0.076)1.222(0.067)3.44(0.058)2.488(0.269)3.789(0.065)6.355(0.447)0.16(0.028)0.278(0.035)3.821(0.508)82

43

p-value ofdifference
0.580
0.470
0.397
0.134
0.191
0.649
0.543
0.736
0.905
0.527
0.326
0.440
0.315
0.896

Panel B
Variable
Number of Job Posting
Applications
oDesk Rating Prior
to HireNo Rating Prior
to HireNumber of oDesk Contracts
Prior to Hire
Indicator for having a
Profile Picture
Level of Education
Number of Offline Jobs
Listed on Profile
Average Score on oDesk
Tests
Number of oDesk Tests
Taken
Wage Bid on the Job
Wage Posted on Profile
Indicator for Female
Contractor
Indicator for Agency
Membership
Number of Items in
Portfolio
Number of Observations

No
Team WorkTeam Work

8.15(0.318)4.543(0.112)0.619(0.043)3.625(0.713)0.863(0.029)1.875(0.079)1.2(0.076)3.464(0.056)2.175(0.207)3.788(0.068)6.611(0.329)0.131(0.029)0.231(0.036)
4.269(0.588)80

8.287(0.386)4.607(0.080)0.604(0.04)
4.787(0.927)0.823(0.031)1.817(0.074)1.183(0.067)3.394(0.045)2.835(0.288)3.731(0.067)7.159(0.447)0.159(0.027)0.274(0.034)3.482(0.477)82

p-value ofdifference
0.786
0.635
0.796
0.324
0.356
0.594
0.866
0.335
0.066*
0.550
0.326
0.495
0.38
0.299

Notes: Standard errors are in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%

44

Table A2: Effect of Team Work & National Diversity on Team Performance, Robustness toPairs with Contractors who Lost Contact(1)(2)
Average Performance Assigned

Pairs with Lost Contractors

VARIABLESTeam Work
National Diversity*Team Work

Ho : Team Work+National Diversity*Team Work=0
Observations
Mean Dependant Variable Independent WorkR-squared(3)(4)
Dropped from Sample

Joint
Ouput

Joint
Producitivity

Team
OutputTeam
Productivity

0.272(0.165)-0.616***(0.234)0.062*(0.033)-0.166***(0.050)0.312*(0.172)-0.694***(0.248)0.069**(0.034)-0.185***(0.054)0.011**

0.002***

0.006***

0.001***

162

162

153

153

0.266

0.274

1.062
0.254

0.135

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Controls included in all regressions are team averages for member education,
platform experience, non-platform work experience, number of platform tests, presence of a profile page, gender,
wage bid, and agency membership. Joint output is the total number of features added by an observation. Joint
productivity is the total number of features added by an observation divided by the number of hours worked on thetask by the pair. The Ho : Team Work+National Diversity*Team Work=0 row reports the p-values of this test. *significant at 10%; ** significant at 5%; *** significant at 1%

45

0.283

Table A3: Effect of Team Work & National Diversity on Team Performance, Full Set ofControls

Team Work
National Diversity*Team Work
Number of oDesk Contracts Prior to Hire
Indicator for having a Profile Picture
Level of Education
Number of Offline Jobs Listed on Profile
Number of oDesk Tests Taken
Wage Bid on the Job
Indicator for Agency Membership
Indicator for Female Contractor

Observations
Mean Dependant Variable Independent WorkR-squared(1)
Joint Output(2)
Joint Productivity

0.300*(0.165)-0.630***(0.238)-0.010(0.012)0.169(0.258)-0.031(0.098)0.020(0.125)0.001(0.034)0.197*(0.106)-0.545***(0.217)-0.003(0.293)0.070**(0.033)-0.168***(0.050)-0.002(0.002)-0.072(0.051)-0.002(0.016)0.022(0.024)0.012(0.011)-0.003(0.019)-0.072**(0.035)-0.031(0.037)

162
1.062
0.255

162
0.135
0.274

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Joint Output is the total number of features added by an observation. Joint
productivity is the total number of features added by an observation divided by the number of hours worked on thetask by the pair. * significant at 10%; ** significant at 5%; *** significant at 1%

46

Table A4: Effect of Team Work & National Diversity on Output, Ordered Logit(1)
Joint Output

(2)

(3)

VARIABLES

Coefficient Estimates

No Features
Added

One Feature
Added

Two Features
Added

Three
Features Added

Team Work0.871*(0.457)-1.878***(0.666)

0.124

0.472

0.351

0.053

0.353

0.485

0.148

0.014

0.178

0.593

0.210

0.019

National Diversity*
Team Work
Independent Work
Observations
Pseudo R-squared
Wald Chi Squared(4)
Predicted Values

(5)

162
0.130850.89

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Controls included in all regressions are team averages for member education,
platform experience, non-platform work experience, number of platform tests, presence of a profile page, gender,
wage bid, and agency membership. Joint Output is the total number of features added by an observation. * significant
at 10%; ** significant at 5%; *** significant at 1%

Table A5: Effect of Team Work & National Diversity on Number of Hours Worked
Hours Worked
Team Work

0.075(1.191)0.315(1.603)3.142(3.740)National Diversity*Team Work
Constant

Ho : Team Work+National Diversity*Team Work=0

0.724

Observations
Mean Dependant Variable Independent WorkR-squared

162
9.140
0.242

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Controls included in all regressions are team averages for member education,
platform experience, non-platform work experience, number of platform tests, presence of a profile page, gender,
wage bid, and agency membership. Joint Output is the total number of features added by an observation. The Ho :Team Work+National Diversity*Team Work=0 row reports the p-values of this test. * significant at 10%; **significant at 5%; *** significant at 1%

47

Table A6: Effect of Team Work & India Pairs on Output and Productivity(1)(2)
OutputTeam Work(3)(4)
Productivity

0.238(0.240)0.148(0.275)0.171(0.352)0.119(0.318)-0.011(0.265)0.317(0.430)0.025(0.028)0.015(0.031)0.078(0.062)0.024(0.033)0.016(0.062)0.105(0.069)

Ho : India Pair+India Pair*
Team Work=Team Work

0.834

0.776

0.288

0.385

Controls
Observations
Mean Dependant Variable Independent Work,
Non-Indian Pairs
R-squared

No
80
0.905

Yes
80
0.905

No
80
0.085

Yes
80
0.085

0.072

0.544

0.090

0.506

India Pair
India Pair * Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Week fixed effects and controls forteam averages for member education, platform experience, non-platform work experience, number of platform tests,
presence of a profile page, gender, wage bid, and agency membership are included in columns 2 and 4. Joint Output
is the total number of features added by an observation. TheHo : North-South India Pair+North-South India
Pair*Team Work=Team Work row reports the p-values of this test. The sample is restricted to pairs of contractors
from the same country. * significant at 10%; ** significant at 5%; *** significant at 1%48

Table A7: Effect of Team Work & North-South India Pairs on Output and Productivity(1)
Output(2)
Productivity-0.076(0.276)-0.539(0.504)0.652(0.567)-0.045(0.082)-0.112(0.107)0.325(0.269)

Ho : North-South India Pair+
North-South India Pair*Team Work=Team Work

0.710

0.332

Observations
Mean Dependant Variable Independent Work,
Same Region of India
R-squared

45
0.929

45
0.084

0.797

0.632

VARIABLESTeam Work
North-South India Pair
North-South India Pair*Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Week fixed effects are included in
all regressions. Controls included in all regressions are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency
membership. Joint Output is the total number of features added by an observation. TheHo : North-South India
Pair+North-South India Pair*Team Work=Team Work row reports the p-values of this test. The sample is restricted topairs of contractors from India. * significant at 10%; ** significant at 5%; *** significant at 1%

49

Table A8: Effect of Team Work & Ethnically Similar Nationally Diverse Pairs on Output
and Productivity(1)(2)
OutputTeam Work(3)(4)
Productivity-0.274 -0.237 -0.103*(0.178) (0.188) (0.055)
0.017
0.093
-0.090(0.364) (0.414) (0.074)-0.444 -0.525
0.099(0.549) (0.545) (0.105)-0.100*(0.056)-0.029(0.067)
0.099(0.110)

Ho : Diverse Pairs in Ethnically Similar Regions+
Diverse Pairs in Ethnically Similar Regions*
Team Work=Team Work

0.751

0.693

0.245

0.140

Country Pair Fixed Effects
Mean Dependant Variable Independent Work,
Non-Similar Pairs
Observations
R-squared

No
1.156

Yes
1.156

No
0.199

Yes
0.199

83
0.288

83
0.309

83
0.336

83
0.387

Diverse Pairs in Ethnically Similar Regions
Diverse Pairs in Ethnically Similar Regions *Team Work

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Week fixed effects are included in
all regressions. Controls included in all regressions are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency
membership. Joint Output is the total number of features added by an observation. Ethnically similar diverse pairs arepairs made up of one contractor from Punjab in India and one from Pakistan, or one contractor from West Bengal in
India and one from Bangladesh. The Ho : Diverse Pairs in Ethnically Similar Regions+Diverse Pairs in Ethnically
Similar Regions*Team Work=Team Work row reports the p-values of this test. The sample is restricted to nationallydiverse pairs of contractors. * significant at 10%; ** significant at 5%; *** significant at 1%

50

Table A9: Effect of Team Work & National Diversity on Individual Performance(1)
Individual Output(2)
Individual Productivity

0.047(0.102)0.200*(0.107)-0.388***(0.143)0.025(0.027)0.036(0.030)-0.104***(0.038)

Ho : National Diversity+Team Work
+National Diversity*Team Work=0

0.127

0.049**

Observations
Mean Dependant Variable,
No National Diversity
R-squared

324

324

0.675
0.176

0.121
0.122

National Diversity
Team Work
National Diversity*Team Work

Notes: An observation is an individual worker. Robust standard errors in parentheses. Country pair and week fixed
effects included in all regressions. Controls included in all regressions are team averages for member education,
platform experience, non-platform work experience, number of platform tests, presence of a profile page, gender,
wage bid, and agency membership. Individual Output is the total number of features added by an individual.
Individual productivity is the total number of features added by an observation divided by the number of hours
worked on the task by the individual. The Ho : National Diversity+Team Work+National Diversity*Team Work=0
row reports the p-values of this test. * significant at 10%; ** significant at 5%; *** significant at 1%

51

Table A10: Effect of National Diversity on Output and Productivity Among Teams

National Diversity(1)
Team Output(2)
Team Productivity-0.807***(0.290)-0.168*(0.090)

81

81

1.350
0.470

0.171
0.392

Observations
Mean Dependent Variable,
No National Diversity
R-squared

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Controls are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency
membership. Joint productivity is the total number of features added by an observation divided by the number ofhours worked on the task by the pair. Sample is restricted to pairs of workers in the team treatment of the experiment.
* significant at 10%; ** significant at 5%; *** significant at 1%

52

Table A11: Effect of Geographic Distance & National Diversity on Pair Performance(1)(2)
Joint Output
Team Work
Log(Geographic Distance Between
Pair Member Cities)
Log(Geographic Distance Between
Pair Member Cities)*Team Work
National Diversity*Team Work

0.392
0.144 0.152**(0.420) (0.456) (0.058)
0.035
0.009 0.020**(0.043) (0.055) (0.009)-0.063 0.026 -0.029**(0.065) (0.091) (0.012)-0.579(0.386)0.127**(0.061)
0.011(0.009)-0.016(0.013)-0.122**(0.049)0.136

0.002***

Ho : Team Work+National Diversity*
Team Work=0
Observations
Mean Dependant Variable,
Independent WorkR-squared(3)(4)
Joint Productivity

119
0.983
0.253
0.291

0.126
0.280

0.358

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included in all regressions. Controls are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency
membership. Sample includes all pairs for which city of residence was available for both contractors. Joint
productivity is the total number of features added by an observation divided by the number of hours worked on thetask by the pair. The Ho : Team Work+National Diversity*Team Work=0 row reports the p-values of this test. *significant at 10%; ** significant at 5%; *** significant at 1%

53

Table A12: Effect of Team Work & National Diversity on Performance by Pair Skill
Differences, Interaction(1)
Joint Output(2)
Joint Productivity

National Diversity * Team Work* Different Skill Sets

0.186
(0.225)-0.450*(0.252)-0.229(0.345)0.543(0.373)0.263(0.330)-0.737(0.476)0.034(0.032)-0.038(0.043)-0.104**(0.052)0.014(0.072)0.068(0.064)-0.124(0.090)

Ho : Team Work+National Diversity*Team Work=0

0.627

0.052*

Observations
Mean Dependant Variable Independent WorkR-squared

162
1.062
0.289

162
0.135
0.292

Team Work
Different Skill Sets
National Diversity*Team Work
National Diversity * Different Skill Sets
Team Work * Different Skill Sets

Notes: An observation is a pair of workers. Robust standard errors in parentheses. Country pair and week fixed
effects are included. Controls included in regression are team averages for member education, platform experience,
non-platform work experience, number of platform tests, presence of a profile page, gender, wage bid, and agency
membership. The Ho : Team Work+National Diversity*Team Work=0 row reports the p-values of this test. *significant at 10%; ** significant at 5%; *** significant at 1%

54

Appendix B

Data Appendix61

Below is the document sent to contractors hired for the job used in this experiment.
I would like some customizations made to DokuWiki, an open source PHP-based wiki engine. DokuWiki uses plantext files so it does not need a database. The site is internal, not available to the public internet so I cannot share the
URL with you. For more information on DokuWiki, see http://en.wikipedia.org/wiki/DokuWiki andhttps://www.dokuwiki.org/features.
The task is as follows: Please add as many of the below Javascript/PHP features in the attached code as possible andsubmit the code with the added features as soon as you have added everything you are able to. One feature
isJavascript/PHP only and one uses both Javascript/PHP and PHP/Javascript (you are to work on theJavascript/PHP part of this task). You will be paid for eight hours of work on this project and all eight hours of work
must be performed on “Day of the week, Month Date”. Another contractor from “country teammate is from” hasbeen hired to work on the PHP/Javascript features in this code. You and this contractor will be working on this in
the team room at the same time so please communicate with each other to work through this task together/You
will work independently of this contractor. Unfortunately I am the hiring manager and I have little knowledge ofthe technical aspects of the task. Therefore, I am not available to answer questions so just do the best you can. Please
send me your output and let me know which features you were able to add once the eight hours is up. Please also
update your memo to let me know what you are working on. Thanks again!
You can login with the username “admin" and the password “asdf".
You’ll likely need to fix the permissions on the data/ directory so that the web server can write to them (probably
chwon -R www-data data/, where www-data is the user which your webserver runs as).

PHP Task
Login using either username or email address
Currently users must use their username to login. Allow them to use either their username or their email address tologin.
For example, the "admin" user has the email address “admin@example.com" and the password “asdf". Allow the“admin" user to login either by entering the username “admin" and the password “asdf" OR by entering the email
address “admin@example.com" and the password “asdf".

Javascript Task
Make a popup for the login dialog.
Currently clicking "login" directs the user to a new page. Update this link so that, when clicked, a popup containing
the login form is shown (similar to, for example, http://www.meetup.com/).

Combined Javascript & PHP Task
Show when a page is being edited.
Make the “edit page" text red when the current page is being edited.
61 Italicized words indicate content that varies by the type of coding language the contractor was hired to complete.

Bolded words indicate content that varies by whether contractors are in the team work treatment or not.

55Use AJAX to poll the server every 15 seconds checking to see whether the current page is being edited. If it is, change
the color of the "edit page" text to red. Change it back to the original blue when the page is no longer being edited.
For example, if Alice and Bob both have the start page open, then Alice clicks “edit this page", the color of the “editpage" text in Bob’s web browser should change to red. Once Alice finished editing the page (either by cancelling theedit or saving the new page) the color of the "edit page" text should return to the original blue.

Appendix B.1

Supplementary Job Posting Information

This section describes additional information about the job posting information beyond what was described in section
2. Other than the title of the job and the job description, the information available to contractors on job postings is
standardized by oDesk. In particular, oDesk posts employer information on all job postings to applicants can see how
many contracts employers have hired for on the site, how much they have spent and feedback from previous hires. In
addition, all job postings have to specify the estimated time the contract will last and the approximate number ofhours per week the job will require. Both of these measures must be selected by the employer from a list of
pre-specified options. Screenshots of the Javascript and PHP job postings used for the experiment are provided in the
appendix of this paper.
An important requirement of oDesk job postings for the purposes of this experiment is that employers must specify at
the time of posting which team room contractors hired for the job will work in. Once hired, contractors cannot be
removed from this team room. Therefore, to ensure that contractors in the team work treatment were only able tocommunicate about this task with their teammate and that those in the independent work treatment were not able tocommunicate with any other contractors about the task, one job posting for each participant was required. Thisinstitutional feature of the site made it necessary to determine which jobs would allow team work among pairs ofcontractors and which would not before contractors were able to apply for them. However, job postings do notindicate which team room the hired contractor will work in, and the job postings do not differ by treatment group so
applicants cannot have known in advance of being hired whether they would be working with a teammate or not.

56

Below are screenshots of the Javascript job posting and the PHP job posting. The employer work history andfeedback is blocked out to protect the privacy of contractors on the site.

Figure B1: Javascript Job Posting57

Figure B2: PHP Job Posting58

Appendix B.2

Supplementary Interview Information

Below is the text provided to interviewees for the Javascript job.
Hello, thanks for applying to my job. I have four interview questions for you to answer. Please answer as honestly as
possible as we are looking to hire the person best suited to this job. Please answer all questions in an oDesk message;
I’m not available to communicate over Skype.
1) If you have any Javascript experience, please give up to 5 examples of your experience.
2) PHP knowledge is not needed for this job but if you do have any PHP experience, please give up to 5 examples ofyour experience.
3) Please list all the countries you have lived and/or worked in.
4) In one paragraph, please describe why you think you are well suited for this job.
Also, please confirm whether you are able to work your hours on this job on (Date job is to be completed on).
Below is the text provided to interviewees for the PHP job.
Hello, thanks for applying to my job. I have four interview questions for you to answer. Please answer as honestly as
possible as we are looking to hire the person best suited to this job. Please answer all questions in an oDesk message;
I’m not available to communicate over Skype.
1) Javascript knowledge is not needed for this job but if you do have any Javascript experience, please give up to 5
examples of your experience.
2) If you have any PHP experience, please give up to 5 examples of your experience.
3) Please list all the countries you have lived and/or worked in.
4) In one paragraph, please describe why you think you are well suited for this job.
Also, please confirm whether you are able to work your hours on this job on (Date job is to be completed on).

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