Founding Team Research Articles

High-Tech Immigrant Entrepreneurship in the United States

This article reports the results of a national survey that estimates the rate of immigrant entrepreneurship in a representative sample of high-impact firms in high-technology industries in the United States. The authors report key descriptive statistics about the companies and their founders. About 16% of the companies in the sample, for instance, number at least one immigrant entrepreneur among their founding teams, while about 77% of the immigrant entrepreneurs are U.S. citizens. Three multivariate analyses are carried out that compare high-impact, high-tech firms that count at least one immigrant in their founding teams with those that were founded by native-born entrepreneurs. It is found that the two groups of firms are similar with respect to economic and technological performance. Immigrant-founded firms are more likely to report that they have a strategic relationship with a foreign firm. The authors conclude by briefly considering the potential implications of their findings for immigration and economic development policy.

The influence of entrepreneurial infrastructure on entrepreneur networking: a comparative case study of Russian and Finnish founding teams

Entrepreneurial infrastructure strongly affects different outcomes of entrepreneurial behaviour, in particular, the establishment of new business relations and their development. This study aims to explore the influence of entrepreneurial infrastructure on the process of establishing new business relations and to compare the networking activities of founding team members from Russia and Finland. Adopting a process based view and following a comparative case study strategy, we found that the entrepreneurial infrastructures of the two countries, specifically referring to the stability of the economic climate, availability and access to the services of entrepreneurship supporting organisations, and the overall level of trust, all influence the ratio between formal and informal relations in the entrepreneurial networks of the founding teams studied. Our findings suggest several practical implications for entrepreneurs and business managers in both countries.

ASIAN AMERICAN-FOUNDED VENTURES IN SILICON VALLEY: CHALLENGES, STRATEGIC PARTNERSHIP, AND PERFORMANCE

This paper examines the performance of Silicon Valley ventures with Asian-American founding teams. We review some challenges faced by these ventures, compare their performance with that of other ventures, and analyze the impact of strategic partnerships on their performance. Our results indicate that firms founded by Asian American entrepreneurs tend to require more time to reach initial public offering (IPO) status than do other ventures in Silicon Valley. Our results further show that, despite needing this extra time, Asian American-founded ventures significantly outperformed their counterparts in 12-month post-IPO share price gain. This superior short-term post-IPO performance suggests that Asian American firms, particularly those that lacked relationships with U.S.-based strategic investors, might have been undervalued prior to and at IPO.

From Minds to Markets

The resource-based view suggests that firms’ heterogeneous resource endowments are important for explaining interfirm performance differences. To date, however, the literature provides little insight on the factors that shape the identification of markets in which firm resources, as embodied in a product or service, can create value for end customers. Building on entrepreneurship research and Penrose’s early resource-based work, the authors examine how four main types of pre-entry human capital endowments (i.e., the characteristics that the founders bring to the founding process) shape the identification of market opportunities for emerging technology firms. They find that prior entrepreneurial and management experience endowments enhance, while marketing and technological experience endowments constrain, the number of market opportunities identified. In addition, the authors find that the number of market opportunities identified depends on the combinations of generalized and specialized endowments in the founding team.

Antecedents of Failure for Newly Chartered Banks in the U.S. Banking Industry

In the United States, newly chartered banks are subject to increased regulatory scrutiny during their early years of operation to ensure their long-term viability. As the record number of bank failures in 2009 has shown, this additional regulation does not guarantee success. To better understand the internal factors in this environment that result in organizational distress, an antecedent failure state, the authors focus on the group-level characteristics of the banks’ founding teams, specifically ownership concentration and four explicit types of founding experience. Using a sample of 129 banks based in Florida, they find that increased ownership concentration, prior industry experience, heterogeneous occupational experience and joint prior founding experience and prior shared experience decreases organizational distress. Their results provide direction on characteristics that may help firms avoid organizational distress.

When the going gets tough, do the tough get going? The pre-entry work experience of founders and high-tech start-up survival during an industry crisis

This article explores the possibility that under an intensely negative industry-specific shock, the positive relationship between the human capital of founders and the survival prospects of start-up businesses may actually be negative. Starting from a theoretical perspective to derive testable hypotheses, the study examines a sample of 179 Italian start-ups operating in the information and communication technology services market created during the boom period from 1995 to early 2000. Econometric analyses provide evidence that, during an intense industry crisis (that is, early 2000 to 2003) entrepreneurs with a substantial amount of prior work experience may pursue an exit strategy. This also highlights the importance of distinguishing between different types of work experience and different exit routes: founding teams with highly specific work experience show a higher probability of pursuing mergers and acquisitions (M&A), while a higher level of generic work experience is found to be more conducive to firm closure.

The Impact of Founders' Professional-Education Background on the Adoption of Open Science by For-Profit Biotechnology Firms

This paper investigates the effect of founders' professional-education background on the adoption of an open-science technology strategy, using a sample of 512 young biotechnology firms. After controlling for founders' prior work experience and other organizational and environmental factors, I find that firms with proportionally more Ph.D.-holding entrepreneurs on the founding team have a higher probability of adopting open science. In addition, founders' educational background can mitigate the constraint of organizational environments on strategy. A crowded technological niche provides a more challenging environment for firms to implement open science, due to higher scooping risks. The deterrent effect, however, of such a high-risk environment is smaller among firms founded by proportionally more Ph.D.-holding entrepreneurs. There is also some evidence of a stronger effect of founders' educational background on open science in an institutional environment in which open science has yet to become the industry norm. This finding is consistent with and complements the growing body of research that emphasizes the importance of entrepreneurial background in developing knowledge about new-venture strategy and structure. This paper was accepted by Olav Sorenson, organizations.

The Impact of Founders’ Professional Education Background on the Adoption of Open Science by For-Profit Biotechnology Firms

This paper investigates the effect of founders’ professional-education background on the adoption of an open-science technology strategy, using a sample of 512 young biotechnology firms. After controlling for founders’ prior work experience and other organizational and environmental factors, I find that firms with proportionally more Ph.D. - holding entrepreneurs on the founding team have a higher probability of adopting open science. In addition, founders’ educational background can mitigate the constraint of organizational environments on strategy. A crowded technological niche provides a more challenging environment for firms for implementing open science, due to higher scooping risks. The deterring effect, however, of such a high-risk environment is smaller among firms founded by proportionally more Ph.D. - holding entrepreneurs. There is also some evidence of a stronger effect of founders’ educational background on open science in an institutional environment in which open science has yet to become the industry norm. This finding is consistent with and complements the growing body of research that emphasizes the importance of entrepreneurial background in developing knowledge about new venture strategy and structure.

IT Competence in Internet Founder Teams

In the Net Economy, numerous start-ups relying on Internet-based business models have been founded in the recent years. In these ventures IT experts are confronted with different requirements to those of traditional software development. It can thus be assumed that founders in the Net Economy prefer IT experts with a different competence profile. Based on an elaborate competence model for IT experts in Internet-based ventures, founder preferences are empirically analyzed and related to the novelty of the venture’s product. An adaptive conjoint analysis is applied to obtain utility values for single components of competence. Using cluster analysis, four different competence profiles are identified which correspond to prototypical IT experts bearing different core functions. Data analysis suggests that founders with more innovative products differ from founders with less innovative products in their perception of the optimal IT expert’s competence profile. The results have implications both for career decisions of IT experts and for founders of Internet start-ups who are looking for co-founding IT experts. This study is one of the first to explicitly focus on IT competence in Internet-based ventures. It therefore extends existing research on IT competence to a new and dynamic industry.

In the Blood: Organizational History and the Heritability of New Venture Performance

A growing literature on the genealogy of new firms has demonstrated a powerful link between the career history of founding teams and the future performance of the organizations they create. Yet there is no consensus on what historically contingent material individuals actually carry from one organization to another, as well as a lack of theory about how such material is transferred from one organization to another. By examining the pathways by which genealogy is transmitted through the action of individuals to new firms, and combining that with an empirical analysis of over 250 new firms in the computer game industry, this paper seeks to shed additional light on the linkage between genealogy and new venture performance. I conclude that the entrepreneurial prominence of a founder’s prior affiliation, as opposed to the founder’s prior routines and industry knowledge, transfers from individuals to new ventures, and has a persistent effect on new venture performance.

Founding Team Characteristics, Routines Formation, and Venture Performance

Founding Team Characteristics, Routines Formation, and Venture Performance

Focus or Diversify? Aligning Founding Teams with Strategy and Environment

How does the relationship between founding team composition and venture performance depend on the venture’s strategy and business environment? Using data from a novel survey of 2,067 firms, we show that while diverse founding teams tend to exhibit higher performance, this is not universally true. We find that founding teams that are diverse are likely to achieve high performance in a competitive commercialization environment. On the other hand, technically-focused founding teams are aligned with a cooperative commercialization environment and when the enterprise pursues an innovation strategy. These results are robust to corrections for endogenous team formation concerns. The findings suggest that ventures cannot ignore founding team composition and expect to later professionalize their top management teams to align with their strategy and environment.

WITHDRAWN: The effects of founding team diversity and social similarity on venture formation

WITHDRAWN: The effects of founding team diversity and social similarity on venture formation

Esperienza lavorativa dei fondatori e sopravvivenza delle giovani imprese high-tech in mercati in crisi

- This article adds new insights into the relationship between the founders' human capital and the survival prospects of start-up businesses. The impact of founders' human capital on firm survival is controversial. On the one hand, more experienced and skilled individuals are likely to create start-up businesses with a high chance of survival; on the other hand, their opportunity costs to run the firm may be high given the potential returns for investing their efforts in alternative employment opportunities. Analysing a sample of 179 Italian start-up companies created during 1995-early 2000 and operating in the ICT services markets, this study provides evidence that, in intense industry crises (early 2000-2003), highly work-experienced entrepreneurs may pursue an exit strategy, highlighting the importance of distinguishing between different types of work experience and different exit routes. In particular, founding teams with highly specific work experience show higher probability of following the M&A route, while a higher level of generic work experience is more conducive to closure. Keywords: high-tech entrepreneurship; young firm survival; founders' human capital Parole chiave: imprenditorialitŕ high-tech; sopravvivenza di giovani imprese; capitale umano degli imprenditori Jel Classification: L26 - L86

Ability Matching and Survival of Start-Ups

In this paper, I analyse how the survival of new firms is affected by the average ability level in the founding team, the team size, team members’ homogeneity with respect to ability, and team members’ heterogeneity with respect to education. As a theoretical basis, I apply the O-ring theory (Kremer (1993)). Using a rich employer-employee data set on the whole population of Danish firms founded in 1998, I find that the average ability level in a team and the team size have positive effects on firm survival. Having a team at all is the most crucial factor for the probability of survival of young firms. The degree of homogeneity with respect to ability and the degree of heterogeneity with respect to educations have no effect on the survival probability.

Cellular Transplants, 20 Years Later: The Pharma Initiative

Cellular Transplants, 20 Years Later: The Pharma Initiative

Founder team interaction, customer and competitor orientation in software ventures

PurposeDevelopments in the software industry have shown the need for sustainable and effective management strategies, especially for new ventures. Entrepreneurship literature suggests marketing to be one of the pivotal predictors of business performance. Previous empirical studies have shown the importance of social interaction and team work quality for new venture performance. The purpose of this paper is to apply founder team interaction quality (IQ), and the customer and competitor orientation concept of marketing research to new software venture performance.Design/methodology/approachAn empirical study using a fully standardized questionnaire was conducted in 101 young software ventures. Two founders in each company filled out the questionnaire separately allowing superior tests for reliability and validity of the research framework.FindingsThe results show team IQ to be a powerful predictor of both customer orientation and competitor orientation. Furthermore, a positive, linear relationship between competitor orientation and technological performance has been found. There is a curvilinear U‐shaped relationship between customer orientation and all examined success dimensions, i.e. economic, market and technological success.Originality/valueBased on a theoretical research framework and a comprehensive empirical study, the paper contributes to a limited body of research and provides insight for managers of young ventures in the nature of teamwork and IQ and its effects on market orientation and company performance.

Towards a Dynamic Model of Founding: Unlocking the Origins of Organizational Variation - Executive Summary

How do entrepreneurs make strategic decisions during new venture formation? This is an important question because the strategies that entrepreneurs select have critical short- and long-term implications (Eisenhardt and Schoonhoven, 1990). In the short-term, an entrepreneur's strategy choices will affect the new venture's likelihood of survival. In the long-term, the entrepreneur's strategy choices will affect the direction of the new venture's growth as well as its level of competitive advantage within the industry. This phenomenon, whereby initial choices are consequential for a new venture's short- and long-term existence, is termed an effect (Stinchcombe, 1965). The occurrence of imprinting effects has been demonstrated by an abundance of empirical research across a variety of industry settings (e.g., Romanelli, 1989). In some cases, research has even shown that imprinting effects exhibit positive feedback, such that initial choices become more influential over time (Eisenhardt and Schoonhoven, 1990). While a great deal of research has shown the importance of imprinting effects for a new venture's development, there has been relatively little research that explores how entrepreneurs come to the initial decisions that underlie these effects. Although little is known regarding the factors that affect an entrepreneur's strategic decision-making during new venture formation, past evidence points to several factors that may be influential. In particular, past research highlights both factors in the environment (e.g., public policy, competitive pressure, and product technology) as well as factors internal to the new venture (e.g., personality and knowledge of the founder and founding team) (e.g., Shane and Khurana, 2003). In this dissertation I focus on knowledge rather than the environment or personality characteristics for two primary reasons. First, while the nature of the environment can explain general trends within an industry (e.g., overall entrepreneurial activity), it cannot explain why specific individuals respond differently to the same industry environment. Second, the research on personality characteristics has generally yielded mixed results suggesting, at best, a weak relationship between personality traits and decision-making outcomes (Aldrich, 1999). In this dissertation, I examine how an entrepreneur's prior knowledge relates to the strategy choices he/she makes during new venture formation. I also examine how the founding team members affect the entrepreneur's decision-making. I first develop a set of predictions and then test these predictions using data from 120 new ventures in the United States air transportation industry from 1995-2005. In the following pages I present an executive summary that reviews the key predictions and findings from my research. I conclude the executive summary by discussing the implications of my research for practicing entrepreneurs, investors, and public policy.

Erratum

This article has been withdrawn as it was published elsewhere and accidentally duplicated. The original article can be seen here: 10.1108/19348830810915532. When citing the article, please cite: Lei-Yu Wu, Chun-Ju Wang, Chun-Yao Tseng, Ming-Cheng Wu, (2008), “Founding team and start-up competitive advantage”, International Journal of Organizational Analysis, Vol. 16 Iss: 1/2, pp. 138 - 151.

High-Technology Immigrant Entrepreneurship in the U.S.

In this study, we quantify the role of immigrants in high-tech entrepreneurship in the United States. We report the results of a survey of a nationally representative sample of rapidly growing high-impact, high-tech companies. This group of companies is very important to the U.S. economy, because they account for a disproportionate share of job creation and economic growth. We find that about 16% of the companies in our sample had at least one foreign-born person among their founding teams. This estimate is lower than that found in most previous studies of high-tech immigrant entrepreneurship. Nonetheless, our data show that immigrants play a crucial role in this vital economic activity.