This study complements previous literature by bridging activity theory and the broaden-and-build theory to examine how happiness (as an intrinsic driver) and knowledge sharing (as an extrinsic driver) influence team performance. The contributions of this study are twofolds. First, this study fills a research gap concerning what mediates the simultaneous influences of happiness and knowledge sharing on team performance. Second, both main and moderating effects of happiness in the development of team performance are explored in this study, which is rarely discussed in the literature. By surveying 116 teams from high-tech firms in Taiwan, this study opens a black box regarding the mediation of team proactivity and team proficiency and the moderation of happiness in the development of team performance. Lastly, managerial implications and limitations based on the empirical findings are provided.