Team bonding can improve productivity in several ways. But the key reason it works is that it helps an employer or supervisor communicate to employees that they are invested in the success/ progress of the employees, which in turn keeps employees motivated and more willing to invest time and resources in the workplace.
Also, it helps break the ice. When guards are let down, ideas can flow easily in a less bureaucratic manner, enabling everyone to contribute as necessary to achieve desired results. Besides, during team bonding activities, you get to unveil the hidden potential of your employees and  improve communication, especially between managers and subordinates.