Scholars have noted the central role of teams as a key driver of innovation, but a core question that remains is how these innovation teams should be designed. Although organizations may set up R&D teams in a similar formal structure, different social structures may result in variability in performance. This research investigates the effect of status differentiation on R&D team innovation. More specifically, it examines a central, yet relatively unresolved issue: Is a hierarchical team or an egalitarian team more innovative? Prior theory and research point to both a hierarchical as well as egalitarian design positively influencing innovation, and we attempt to answer this question and reconcile these competing hypotheses with a sample of actual R&D teams from the U.S. pharmaceutical industry.