Jewels in the Crown: Exploring the Motivations and Team Building Processes of Employee Entrepreneurs

Abstract

This study uses inductive methodology to examine the motivations and team building processes of employee entrepreneurs through the analysis of thirty founding narratives of disk drive industry spinouts founded between 1977-1997. Our grounded theory building approach uncovers the underappreciated role of non-pecuniary motivations and human capital corridors in the team assembly process. We find ringleaders — the founders who spearhead spinout creation — are often driven by a non-pecuniary desire to create given a fertile industry environment, particularly when they encounter bureaucracy, interpersonal/ethical frictions, or strategic disagreements within the parent firm. They seek out, through human capital corridors, the best cofounders possessing complementary knowledge, skills, and problem-solving abilities but similar values, and work ethic. Cofounders, particularly those without prior startup experience, were eager to ensure they left on good terms with their parent firms, to retain the option of return to paid employment as a safeguard against risks inherent in entrepreneurship. These motivations and team building processes shape the spinout firm’s strategic considerations: the founding team seeks to create unique value propositions, with a reluctance to steal technologies from their parent firms, but a willingness to poach talent. Triangulation with quantitative data reveals that spinouts created with human capital corridors team building processes had significantly better capabilities and success than spinouts with that lacked some aspects.