The Temporal Dynamics of Firm Emergence by Team Composition: Examining Top-Performing Solo, Family, and Team-Based Startups

Abstract

IntroductionFirm emergence is the temporal sequence of events or activities that occur as entrepreneurs create a new (Liao & Welsch, 2008) and includes types of venture creation actions that all nascent entrepreneurs initiate in attempting to launch a firm, such as: obtaining resources, developing new products, seeking funding, and making sales. Yet, temporal dynamics of firms during this gestation period are not well understood. Some scholars have argued that firms emerge through a relatively sequential series of somewhat predictable phases (Churchill & Lewis, 1983; Galbraith, 1982; Gartner & Starr, 1993). An alternative perspective argues that gestation period is a disorganized assortment of startup activities (Korunka, Frank, Lueger, & Mugler, 2003; Liao, Welsch & Tan, 2005) and point to relative insignificance of startup activity timing (Carroll & Hannan, 2000). As a result, some scholars judge completion of a series of startup activities a useful method by which to evaluate whether firms are emerging (e.g. Block & MacMillan, 1985; Carter, Gartner, & Reynolds, 1996; Manolova, Edelman, Brush & Rotefoss, 2012). Yet, point at which a series of startup activities results in creation of a new firm can be difficult to determine (Reynolds & Miller, 1992). As a result, in our study, we adopt view that advocates for quantifying achievement of a succession of startup activities as method by which to gauge firm emergence. The type of enterprise may also have bearing on firms' emergent growth and trajectory, as dynamics at play within firms started by individual entrepreneurs may impact firm emergence differently than within those firms started by a plurality of founders. Similarly, startups founded by teams composed of non-family members may emerge in a different manner than those started within families. Our overall interest lies in developing a better understanding of temporal dynamics of firm emergence during gestation period, and to help identify what is unique about those new firms with a substantial growth trajectory.In this study, we examine growth and variation in firm emergence by enterprise type. In this investigation we are led by research question: Do startups differ in their venture creation process in terms of levels of firm emergence (i.e. number of startup activities completed) and in temporal variation of emergent change trajectory based on peer group association? To explore this issue, we develop hypotheses for following sequence of investigative questions that examine levels of firm emergence over time, temporal variation of emergent change trajectory, and determine if firm emergent change differs for groups of firms.To test our hypotheses, we develop longitudinal models that probe dynamics of emergence by examining firms' successive measurements during gestation period using a sample drawn from Panel Study of Entrepreneurial Dynamics II (PSED II), a database of US-based individuals in various stages of starting a firm.Our study helps to contribute to an increasing scholarly interest in research that lies at nexus of entrepreneurship and family business in pertinent and significant ways. An understanding of entrepreneurial teams has grown in past several years, yet literature on entrepreneurial teams comprised of family members is limited. In addition, relative to their importance, there is scant information that compares firm gestation process of nascent solo entrepreneurs, with that of non-family and family business startup teams. We focus on completion of a series of startup activities by modeling temporal dynamics of nascent firms to provide insight into how startups emerge over time, and to allow researchers to better develop well-informed questions for subsequent study. Therefore, our study also contributes to understanding of gestation period, a critical phase in startup process. …