Founding Team Research Articles

The Why and How of Founding Teams: Key Theoretical and Methodological Directions

Academic research on entrepreneurial founding teams has experienced the proverbial hockey-stick-like growth that founding teams so often envision for their ventures, yet is still in an emergent state. This symposium takes a deep dive into two pivotal challenges facing the field: advancing relevant theoretical developments and mobilizing rigorous methods, with interactive panel discussions among six expert scholars. Participants will also have the chance to engage more closely with panelists through breakout sessions, offering a beneficial opportunity to build a community of multidisciplinary, collaborative, and innovative scholars working together to advance research on founding teams.

Built to Last: A Human Capital Resource Formation Perspective on Diversity and New Venture Survival

New venture team diversity and entrepreneurial success or failure remain critical topics in the field. Utilizing a strategic human capital resources framing, this study leverages data from the Kauffman Firm Survey to assess the degree to which racial diversity and human capital within the founding team affect new venture survival. In a study of 2,459 ventures, results indicate that industry-specific human capital (ISHC) moderates the relationship between racial diversity in the founding team and hazard of failure. The relationship is such that for teams with a high level of ISHC, racial diversity helps reduce the likelihood of entrepreneurial failure. Similar results did not hold for generic human capital (GHC) operationalized as percentage of team members with a bachelor’s degree; however, an effect was demonstrated when the measure used the percentage of team members with a master’s degree or higher. In addition, the three-way interaction between ISHC, GHC and racial diversity is significant, suggesting that teams benefit most from diversity when human capital stocks are high in the team. This result supports human capital resources theory by demonstrating the utility of the emergence of complex unit-level resources within the new venture team. Implications suggest that the make-up of the founding team plays a role in venture performance and that potential challenges associated with diverse teams may be countered with higher levels of human capital.

The Influence of Founding Experience on the Establishment of Organizational Structures

This article introduces a multi-level human capital perspective on the origins of new ventures’ organizational structures. We examine the human capital of the founding team and venture capital investors and establish a model that details each party’s influence on the venture’s organizational design. In explaining the role of human capital in entrepreneurship, we argue that the influence of experienced founding teams and that of experienced venture capital investors both lead to differentiated organizational designs but that there is no additional effect when both parties are experienced. To validate our hypotheses empirically, we compile a longitudinal database of 199 new biotechnology ventures founded between 2001 and 2012 with 1,723 observation years and 460 funding rounds. We find that both experienced entrepreneurs and experienced venture capital investors lead to deeper and broader organizations in the absence of the other but no additional effect of their simultaneous presence. This study contributes to human capital research in the realm of entrepreneurship by considering the experience of the founding team and venture capital investors in an integrated, multi-level model. In addition, this study contributes to organizational research by providing detailed evidence on the differences in organizational design choices made by experienced founding teams and experienced venture capital investors compared to their unexperienced counterparts.

Too Much of Two Good Things: Effects of Founders’ Educational Level and Heterogeneity on Start-Up Funds Raised

The success of early-stage start-ups is strongly dependent on founders’ education. Yet, while scholars maintain that investors should consider founders' education an important signal of start-ups' prospects, mixed empirical findings suggest that more education does not always trigger positive investor reactions. Scholars have thus urged the development of new theoretical insights that may explain why and when education is beneficial to start-ups' emergence. Based on cognitive and social psychology literature, in this article, we evidence that different configurations of founders' education affect the ability of founding teams to obtain funding. The empirical support that we obtained from a sample of 1078 start-ups helps reconcile the contradictory findings of past research through a joint examination of two dimensions of founders' education that were previously only investigated separately—the level of education and the heterogeneity of educational backgrounds. Our focus on the group dynamics founding teams advances our understanding of the contribution of founders’ education onto early-stage start-ups' fund raising. In greater detail, educational level and educational heterogeneity positively affect the amount of funds raised, but their joint presence negatively moderates such a relationship. In doing so, we also provide start-uppers and policymakers with important information regarding how cofounders should group together when launching a start-up.

Agreeing to Be Different: Startup Founding Teams, Cultural Legacy, and Atypicality

Forming an atypical organizational culture is unusual, and requires agreement among founding team members. I propose that startup teams with high diversity in cultural legacies that co-founders bring from previous employers tend to converge to the culture that is already taken for granted in the industry to resolve cultural disagreements. This convergence is amplified when startup teams belong to a cultural cluster in which stronger norm is manifested. However, teams with co-founders who are equipped with more diverse cultural elements can cultivate a more atypical culture by recombining cultural tools. Furthermore, cultural recombination is facilitated when a team incorporates cultural elements that broker two otherwise disconnected elements. These ideas are examined in an analysis of U.S. technology startup teams in CrunchBase and their parent organizations. I use 3.1 million employee reviews of the total technology company population from Glassdoor to identify the key cultural elements of technology companies over the past 12 years. Findings are consistent with the predictions. Implications for the study of startup culture, team diversity, and cultural recombination are discussed.

An Exploratory Study on the Nature and Origins of Social Venture Mission

Mission is central to social venturing, but little is known about the nature and origins of social venture mission. The field lacks a theoretical framework for understanding the moral content of “prosocial” missions that rely on quite different—and potentially conflicting—moral values. We engage in an exploratory quantitative study, wherein we draw on moral foundations theory and social identity theory to develop framing questions related to the moral discourse in social venture missions and the role of founders’ partisan identities in infusing these missions with moral values. We construct a novel dataset by performing computer-aided text analysis on the mission statements of over 50,000 nascent nonprofit ventures in the United States and matching founding team members to voter registration data. We find that moral foundations are frequently espoused in mission statements. We also find that the partisan political identity of the founding team is strongly associated with differences in the moral discourse in social ventures’ stated missions in ways that intriguingly differ from prior work relating moral foundations to political beliefs. Our work contributes to social entrepreneurship research by offering a new way of looking at social venture mission, a road map for future empirical studies, and practical and policy implications.

Do You Feel What I Feel? Shared Cognition, Shared Affect and Co-Founder Exits

Extant research on co-founder exits presents contradicting results: exits can either lead to venture failure or enhance the effectiveness of the remaining team. Using in-depth, qualitative case studies of dynamic affective interactions and follow-up interviews from nine founding teams over twenty months, we examine how differences in team shared affect and cognition before a co-founder exit subsequently impacts how cofounders exit, and the impact of their exit. We develop a model of affective and cognitive dynamics in the co-founder exit process and identify how patterns of shared affect and cognition cause different team vulnerabilities leading to differing team behaviours which in turn influences team conflict, exit speed, co-founder commitment and co-founder relationships. Our findings have important implications for co-founder exit literature, we propose why some exits lead to failure while others improve the venture overall.

Founding Team Human and Social Capital and Strategic Reorientation

Strategic reorientation has long been considered pivotal for the long-term survival of new ventures. However, despite prescriptions regarding the usefulness of strategic reorientation, very few ventures, in fact, reorient. In this paper, we illustrate the antecedent conditions of strategic reorientation. Using the mechanism of problemistic search and screening theory, we hypothesize that a venture's human and financial capital have different effects regarding strategic orientation. We test our theory using a sample of firms who had applied to be a part of an accelerator program and find support for our assertions.

Team Value Compositions and Business Model Quality in Social versus Commercial Entrepreneurial Teams

Research on social entrepreneurial teams is still scarce. Drawing on the theory of paradox, we suggest that social, in contrast to commercial entrepreneurial teams, improve their venture's business model quality when combining founding team members with opposing individual values (i.e., self-enhancement and self-transcendence values). Conversely, we propose that a combination of opposing individual values inhibits the business model quality of commercial entrepreneurial teams. Surprisingly, using moderated and polynomial regression analyses on 98 entrepreneurial teams, we find that for social entrepreneurial teams, a combination of either high self-transcendence and low self-enhancement, or high self-enhancement and low self-transcendence individual team members’ values is beneficial.

Gender Inequity in Entrepreneurship: Understanding Barriers, Boundary Conditions, and Opportunities

Achieving gender equity in entrepreneurship is a pressing societal concern. A growing number of studies have provided consistent evidence for gender disparities and barriers for female entrepreneurs. Yet, research also suggests that under certain conditions, tied to the unique features of the entrepreneurship context, there may also be a female advantage in venture evaluations and funding outcomes. In this symposium, we hone in on this burgeoning line of inquiry by bringing together four presentations that investigate when and why a female (dis)advantage emerges, and how certain features of this context help to mitigate gender bias. Based on a diverse array of methods (archival, experimental, and video metrics) and samples (angel investors, accelerators, and cofounders), the presentations highlight novel mechanisms underlying gender bias in entrepreneurship settings. Overall, this symposium aims to 1) offer actionable insights for recognizing and addressing gender bias in entrepreneurship and 2) identify new directions for gender research more broadly. Women Entrepreneurs Don’t Ask (For Enough) in the Entrepreneurial Negotiation Process? Presenter: Anyi Ma; Tulane U. The Effects of Masculinity Displays by Female Entrepreneurs on Venture Evaluation Presenter: Soojin Oh; Pennsylvania State U. Presenter: Aparna Joshi; Penn State Smeal College of Business How the Functional Titles of Male and Female Cofounders Affect Funding in Mixed-Gender Founding Team Presenter: Steven Gray; U. of Texas at Austin Presenter: Melanie Milovac; INSEAD “Gender Diversity Matching” Helps Ventures Raise Funding: Evidence from a Natural Experiment Presenter: Dana Kanze; London Business School Presenter: Alessandro Piazza; Rice U.

The Entrepreneurial Founding Team - Unveiling the Dual Formation Strategy

The entrepreneurial founding team formation literature provides a continuum where the economics lens focuses on 'resource dependency and the social psychology lens focusing on 'interpersonal attraction' occupy the opposing ends. Subsequently, studies found that resource dependency and interpersonal attraction are not mutually exclusive. Instead, both thew collectively explains the EFT formation. This is referred to as the 'dual formation' strategy. However, the existing studies do not solve the debate on how the 'dual formation strategy' reveals itself in the decision-making process. Considering this, we employ a temporal, longitudinal perspective to investigate EFT formation processes in the context of the emerging economy of India. We collected primary data from the founders and co-founders of 13 entrepreneurial firms each year for a period of three years (2017- 2019). Our provides insights that could inform both the literature on entrepreneurial team formation and practitioners involved in the design and delivery of founder pair-up and matching platforms.

Implementing corporate social responsibility through charitable foundations in professional football: the role of trustworthiness

ABSTRACT Rationale/Purpose: Charitable foundations constitute the prime mechanism for the implementation of corporate social responsibility (CSR) in sport. The relationship between the charitable foundation and the founding professional team sport organization (PTSO) is unique. Although extant research has shown that trust can be an instrumental predictor of organizational performance, we know little of the role of its main component, namely trustworthiness, in the context of CSR implementation through charitable foundations. Design/Methodology/Approach: Drawing on the UK’s football setting, an online survey (n = 124) was used to measure (through CFA and SEM and SPSS AMOS 21) the perceived trustworthiness of charitable foundation employees by their counterparts in PTSOs, and their perceived contribution to the PTSO’s performance. Findings: Findings reveal PTSO’s employees perceive their counterparts in the foundations as being trustworthy and that their CSR activities contribute to the PTSO’s performance. Trustworthiness is a key predictor of the perception that the implementation of CSR-related initiatives through foundations contribute to the perceived performance of the PTSO. Practical implications: Managers should facilitate trustworthy behavior between PTSOs’ employees and their counterparts in the foundations. The competence and predictability of employees of the foundation should be enhanced. Research contribution: This study demonstrates the importance of trustworthiness between employees from organizational entities driven by different goals.

Exploring the sources of knowledge diversity in founding teams and its impact on new firms’ innovation

This paper studies the relationship between founding team knowledge diversity and firms’ innovative performance. We posit that knowledge diversity entails two dimensions: a team dimension and an individual dimension. In particular, we argue that founding team knowledge diversity can derive both from the presence of founders with different knowledge backgrounds, and from the presence of similar jack-of-all-trades (JOTs). We suggest that knowledge diversity is positively associated with innovation, especially when diversity comes from founders with different knowledge backgrounds, instead of coming from many JOTs. Furthermore, it matters more for firms whose knowledge base is oriented towards technical and scientific applications, as opposed to firms with a generalist, business-oriented knowledge base. We provide support to these propositions relying on a study of 1,800 newly established firms in Europe.

Исследование весомости качественных критериев в оценке стартапов венчурными инвесторами

Abctract. In 2021, amid the changes caused by the pandemic, Europe has become a powerful force shaping the global venture capital landscape. The rapid growth has attracted con-siderable attention from both non-European investors and non-European capital. The venture capital market has entered a new paradigm with trends pointing to a vibrant new normal. Accelerating fundamental growth contributes to higher valuations, reflecting additional potential growth in broad targeted markets, with startups gaining market share in many sectors. Larger funding rounds, larger transaction volumes, and faster and larger exits reflect the fact that investors and founding teams are becoming more sophis-ticated and experienced. The digital venture space is replete with investment opportuni-ties. Fintech opens up many opportunities for both developed and developing countries transitioning to a cashless economy. The authors conducted a retrospective study of the methodology for evaluating venture investments based on the analysis of Russian and foreign studies. When studying the material, the Russian specifics and European trends of changes in the venture market are taken into account. A set of qualitative criteria is proposed, according to the authors, rel-evant when considering Russian startups at the beginning of 2022. The proposed classi-fication includes basic criteria that historically define venture investment projects, as well as the minimum necessary for the formation of an offer to an investor.

Entrepreneur narcissism and new venture performance: A learning perspective

Recent research views narcissism as an important personality trait that can explain the heterogeneity in firm performance. This is particularly relevant in the entrepreneurial context as entrepreneurs have a more direct influence on firm strategies than executives in established firms. This study proposes that narcissism has different implications for venture performance when it is reflected as admiration versus rivalry. Moreover, we suggest that a venture’s learning strategy in new product development (NPD) is an important mediating mechanism that links entrepreneur narcissism and new venture performance. Utilizing data collected from 215 new ventures in China, we find that while narcissistic admiration motivates entrepreneurs to focus more on explorative learning, narcissistic rivalry makes them more likely to promote exploitative learning. More importantly, we find that founding team members can potentially reshape the impact of entrepreneur narcissism on venture learning strategy by participating in venture decision-making and by contributing diverse knowledge resulting from their heterogeneous professional backgrounds.

A comparative study of novice and habitual entrepreneur’s choice for founding team member

PurposeThe purpose of this paper is to investigate and compare what criteria novice and habitual entrepreneurs use while adding members to the founding team.Design/methodology/approachThis paper uses conjoint analysis (CA) to provide the order of preference for the “choice attributes.” The logic of CA is that even if two or more attributes influence the choice, it is unlikely that those attributes will have equal importance for founders with different entrepreneurial experiences.FindingsThis paper found a significant difference in the ranking of the attributes by novice and habitual entrepreneurs. In novice entrepreneurs, the effect of direct ties in the form of kinship ties has the highest preference, followed by prior social contact and prior work relations. However, personal friendships and resource dependency received lesser importance than interpersonal attraction because of the similarity in vision, beliefs and values. Habitual entrepreneurs, however, valued resource dependency and prior work relations more than kinship ties. Also, unlike novice entrepreneurs, habitual entrepreneurs sought cofounders from their indirect ties.Practical implicationsThere has been an explosion of interest and funding for programs that help entrepreneurs establish a cofounding team. The authors inform these programs related to the decision concerning assisting novice and habitual entrepreneurs.Originality/valueWhile prior studies examined a single attribute at a time, the strength of this study lies in simultaneously tapping all attributes, along with multiple indicators for each attribute. Additionally, this study distinguishes the selection criteria of cofounders based on the entrepreneurial expertise of the lead founder.

Auditing Tokenomics: A Case Study and Lessons from Auditing a Stablecoin Project

Tokenomics is a vital part of any blockchain project. It is the study of how crypto tokens are used within the ecosystem, their role in the project, and how they are designed to incentivize certain behaviors. There are many ways that crypto tokens can be designed for use within an ecosystem. For example, they can be designed with a fixed supply so that there is no inflation or deflation in the system. Founding teams can also also create tokens which provide voting rights or governance rights to holders in order to give them more incentive to hold onto their tokens instead of selling them on exchanges. Or they can be used to simply pay for fees. The plethora of options that projects have on how they design their token economies, often leaves them with more questions than answers. Deciding on whether the token economy design is robust or not is challenging. Furthermore, a blockchain project not only has to convince themselves, but also those who are going to invest in the project. Innovative crypto-projects often come up with interesting narratives, but they do not always hold. For that reason, a recent trend in the industry is “the tokenomics audit”. The goal of a tokenomics audit is similar to an audit in any other industry (e.g. accounting). The auditor has to assess the viability of a project, while also suggesting potential improvements. The end goal is to provide an independent view on whether a token economy is viable or not. This paper discusses general principles that can be followed when running a tokenomics audit. The paper uses as a case study a recent tokenomics audit, conducted for the BankX stablecoin , by the author of this paper. The paper first discusses general different methods and mechanisms that a tokenomics auditor can employ in order to audit a project. The paper then proceeds to demonstrate how these methods were used in the audit of the BankX project. Tokenomic auditing is still a new area, and there is no set of established methods to conduct an audit. By reviewing this case study, this paper helps provide some lessons to the community, upon which future research can improve. Disclaimer: Nothing in this paper can be interpreted as constituting financial advice. This paper was written for academic purposes only.

The role of human capital in Italian equity crowdfunding campaigns

Crowdfunding has become an established means for new ventures in search for funding and it has received increased attention from scholars and policy makers. One of the most relevant aspects of crowdfunding is to understand the factors associated with the success of a campaign. This paper addresses the issue with a novel dataset of 89 Italian campaigns. Three indicators of campaign success (funds received, funds as a share of target, and number of investors) are estimated as a function of different dimensions of human capital (team size, education, and work experience). We find that campaign success is correlated to team size, the share of members with very high education (i.e. PhD), and the share of members with business education. We also find a non-linear relation with team size, and a significant relationship with the diversification of the team's education. Our study contributes to a recent body of empirical studies on the determinants of the success of an equity crowdfunding campaign by confirming previous findings with a novel dataset and by providing new evidence on the relevance of signals of the founding team quality (e.g. diversity of education) and increasing return of funding to team size.

New venture internationalization and performance: the role of founding team and alliances

Internationalization is an important strategic option for new ventures by providing growth opportunities. This study firstly examines how founding team, alliances and license strategy influence new venture internationalization, and then explores whether new venture internationalization affects its performance. Using panel data of 4,928 new ventures between 2007 and 2009 from the Kauffman Firm Survey, the study finds that the number of active founders and foreign founders, alliances with university and other firms, and license-out strategy are positively related to new venture internationalization. More importantly, it is found that new venture internationalization helps increase revenues. This finding advances a better understanding of why many new ventures go international in their early stage though facing various resource constraints.

Relational composition and member turnover of entrepreneurial founder teams at the nascent stage: a typology and empirical evidence

Team composition matters in shaping entrepreneurial outcomes. Focusing on the preexisting relationships among team members, this study examines how the social relational structure of entrepreneurial founder team influences membership turnover. After distinguishing entrepreneurial teams into family-only, non-family only, and family/non-family mixed ones, the study explores the possibility that family ties can serve as a glue in family-only teams, while they can become a source of schism in teams mixed with family and non-family members. Using data from the Panel Study of Entrepreneurial Dynamics, this research finds that family-only teams have a stable and rigid relational structure with low levels of both member exit and entry, while family/non-family mixed teams have the most vulnerable structure where members tend to leave but new members are unlikely to be recruited. Additionally, non-family teams have an unstable and fluidic structure with a high rate of both member exit and entry. These findings have implications for advancing our understanding of how social relational composition influences the organizational outcomes of entrepreneurial teams.