R&D team diversity and performance in hypercompetitive environments

Research summary : This article examines the effects of an R&D team's composition on its performance outcomes in hypercompetition. The fundamental feature of firms in hypercompetitive settings is that they are constantly challenged to improve their competitiveness in a relentless race to outperform one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find an inverse U‐shaped relationship between team diversity in task‐related experience and performance an important result that diverges from well‐established theories developed in more stable environments. Fundamentally, we show that the role of R&D team experience diversity varies depending on the size of the organizations in which R&D teams operate. While we find a moderating effect for firm age, this effect is not as robust as that of firm size . Managerial summary : This article examines the relationship between R&D team composition and performance in fast‐moving environments. Firms in these environments are constantly challenged to improve their competitiveness by outperforming one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find that a team's diversity in job‐related experience increases its performance up to a certain extent. Once R&D teams become too diverse, performance decreases because communication and coordination become more difficult. We also show that the role of R&D team diversity varies depending on the size of the organizations in which R&D teams operate. Overall, our findings provide several novel implications for the strategy, innovation, and team literatures . Copyright © 2016 John Wiley & Sons, Ltd.