Affiliation‐based hiring in startups and the origins of organizational diversity

Abstract

AbstractMultiple imperatives call for more diversity in organizations, yet we know surprisingly little about why some organizations become more diverse than others. We focus on the early stages of organizations—the composition of founding teams (FTs) and the evolution of subsequent hiring practices, namely the prominence of finding new employees via founders’ prior employer and educational affiliations. Drawing upon theories of entrepreneurial resource mobilization and attraction–selection–attrition (ASA), we argue that FTs with common professional ties imprint post‐founding hiring routines by making affiliation‐based hiring (ABH) a more prominent practice to select new personnel. We posit that, although ABH fades quickly after founding, using this hiring strategy in the early stages of an organization shapes its trajectory for diversity and contributes to workforce homogenization in several dimensions as new firms mature. Using a mixed‐methods approach combining large‐scale employer–employee linked data from Denmark and in‐depth surveys with founders from the US and UK, we find robust support for our theory and provide novel insights to the hiring processes in entrepreneurial firms. Our work advances our understanding of the enigmatic origins of within‐organization homogeneity progression and offers important contributions to both theory and practice.