Human and Social Capital and Ethnically Heterogeneous Founding Teams in High-tech Industries

Abstract

This paper focuses on ethnic homogeneity/heterogeneity in founding teams. We ask whether ethnic heterogeneity of founding teams in high-tech firms is advantageous compared to founding teams with ethnic homogeneity. Based on a population of 1,217 high-tech ventures in two industries, life sciences and information technology, we examine the relationships between founding team ethnic heterogeneity and social and human capital proxies. The findings indicate that heterogeneous co-ethnic founding teams (e.g., ventures set up by entrepreneurs from different ethnic groups) have higher proxies of human and social capital than homogeneous Jewish or Arab founding teams, in general, and especially in life sciences, except for variables related to fundraising, where Jewish ventures retain an advantage in both industries. Therefore, co-ethnic founding teams are characterized by functional diversification and network mechanisms of human and social capital that are advantageous for high-tech ventures. We conclude with theoretical and policy implications.