tThis study investigates the impact of style of budget use on team-level motivation andteam effectiveness. Specifically, we draw on Simons’ work (1994, 1995, 2000) to examinehow, in biotechnology firms, the extent of interactive and diagnostic uses of budgets affectteam effectiveness directly and indirectly through perceived collective efficacy. We used anonline survey to obtain data for this study and analysed the data using partial least squaresapproach. The main results suggest that the extent of interactive use of budgets has directpositive effects on team effectiveness and that the positive effect of the interactive use ofbudgets on team effectiveness is partially mediated by perceived collective efficacy. We didnot find support for the predicted positive effect of diagnostic use of budgets on perceivedcollective efficacy and team effectiveness. We explain the implications of these results