One explanation for the prevalence of self‐managed work teams is that they enable workers with complementary skills to specialize in the tasks they do best, a benefit that may be enhanced if workers can sort themselves into teams. To assess this explanation, we design a real‐effort experiment to study the endogenous formation of teams, and its effect on productivity, when specialization either is or is not feasible. We find a strong positive interaction between endogenous team formation and the ability to specialize, indicating that endogenous team formation is a particularly effective mechanism for promoting team output in production environments that enable the exploitation of skill complementarities.