Does New Venture Team Power Hierarchy Enhance or Impair Venture Performance? It Depends

Abstract

Does power hierarchy in new venture team (NVT) enhance or impair venture performance? In this paper, we integrate the functional and dysfunctional views of power hierarchy and propose that the effect of NVT power hierarchy on new venture performance is contingent upon NVT characteristics (i.e., functional background diversity and team familiarity) and powerholder characteristic (i.e., prior founding experience). Specifically, we argue that the relationship between NVT power hierarchy and new venture performance is positive when team functional background diversity is high but negative when functional background diversity is low. Similarly, the relationship between NVT power hierarchy and new venture performance is positive when team familiarity is low but negative when team familiarity is high. Furthermore, these two sets of interaction effects are strengthened by the powerholder’s prior founding experience. Our hypotheses are supported based on a five-year panel data of 460 observations from 285 NEEQ-listed new ventures in China.