Motivated by the growing importance and use of teams in contemporary organisations, this study set out to investigate the impact of style of budget use on team effectiveness.Specifically, we examine how the extent of interactive and diagnostic uses of budgets affects team effectiveness, both directly and indirectly, through perceived collective efficacy. Our results provide support for the hypothesiseddirect relationships between the interactive use of budgets and team effectiveness but not for the relationship between the diagnostic use of budgets and team effectiveness. We also find support for the predicted direct relationship between the interactive use of budgets and perceived collective efficacy. However, the predicted direct relationship between the diagnostic use of budgets and perceived collective efficacy was not supported. Furthermore, we find that the relationship between the extent of interactive use of budgets and team effectiveness is partially mediated by perceived collective efficacy. We attribute the negative insignificant results for the effects of the diagnostic use of budget on perceived collective efficacy and team effectiveness to the research setting of the study where innovation and creativity dominate. Our explanation is consistent with prior research findings of negative path coefficients for the effects of diagnostic use of controls on motivation and performance in innovation and creativity settings. Our findings have a number of implications.