A founding-team model of creating a venture's culture

As many new ventures are started by founding teams, it is these founding teams that likely engage in creating their venture's culture. We draw on theories of cultural dynamics and the literature on team cognitive diversity to investigate the creation of a new venture's culture. Specifically, we theorize how a founding team's cognitive diversity impacts the team's production of cultural information and the transmission of that information throughout the venture. Cognitive diversity directly influences the founding team's production of cultural information by shaping the diversity of the information set and the speed of its production. Moreover, cognitive diversity can give rise to faultlines within the venture, impacting how venture members interpret cultural information. Importantly, our model suggests a complex interplay between the production and interpretation of cultural information. Understanding culture creation in new ventures is important because a new venture's culture shapes its legitimacy and thus its access to stakeholder resources for venture emergence.     

Entrepreneurial visions in founding teams: Conceptualization,emergence, and effects on opportunity development

Prior research on entrepreneurial visions has typically taken a leadership perspective and explored how the founders’ future images of their ventures motivate themselves and followers. Drawing on an upper echelon perspective and longitudinal case studies of eight founding teams, this study finds that founders’ entrepreneurial visions do not only capture the future images of their ventures, but also the future images of the founders’ relationship with it. Taking into account this personal aspect of visions, we show that within a founding team, the members’ visions can be incongruent, i.e., they cannot be realized simultaneously within the current venture. While our data reveal that vision incongruence tends to occurs when all team members perceive to have an equal status, vision congruence emerges when the attributed status in the team is heterogeneous. Founding teams with more congruent visions tend to follow a focused opportunity development path, while those with less congruent visions tend to follow a comprehensive opportunity development path. Depending on the teams’ behaviors in the face of challenging situations either path can lead to successful opportunity commercialization or failure. We discuss the implications of these findings for the literatures on entrepreneurial visions, opportunities, and upper echelons.     

Antecedents,moderators, and performance consequences of membership change in new venture teams

This paper focuses on initial team size and membership change of new venture teams in two studies: (1) a panel study of 408 emerging ventures, and (2) a cross-sectional study of 124 new ventures. The findings suggest that larger initial team size provides an advantage for new organizations, and that the benefits of adding and dropping team members are contingent on the stage of development of the organization and the dynamism of the environment. Both external environment and team composition factors are associated with turnover in venture teams.     

Entrepreneurial passion diversity in new venture teams: An empirical examination of short- and long-term performance implications

Empirical evidence is mounting that passion is an important part of entrepreneurship, contributing to behavior and outcomes for entrepreneurs, employees, and ventures. Yet knowledge of the performance implications of passion within new venture teams is sorely lacking. We examine how both the average level of entrepreneurial passion and the diversity of passion within new venture teams contributes to venture performance in both the short- and long-term. We test our model with multi-source, multi-wave data collected from 107 new venture teams participating in an accelerator program. Our findings indicate that average team passion is not significantly related to performance, but passion diversity, particularly intensity separation, is negatively related to performance. These findings have important implications for the literature on passion, new venture teams, and group affective diversity.Executive summaryWhile existing studies have substantially improved our understanding of entrepreneurial passion, its sources, and its subsequent impact, insight into this topic remains limited in at least three ways. First, most new ventures are founded and led by teams rather than individuals, yet existing studies predominantly focus on entrepreneurial passion at the individual rather than team level. Second, while there is a prevailing assumption in existing literature that entrepreneurial passion leads to beneficial outcomes consistent with longstanding work in psychology, there is emerging evidence in entrepreneurship that passion may not always be functional and that it can even be dysfunctional. Despite this, we have limited understanding of what types of passion or when or for whom it is dysfunctional. And third, extant work on entrepreneurial passion for individuals and within teams has focused on behavioral or self-report measures of performance (e.g. Cardon and Kirk, 2015; Santos & Cardon, 2019) as well as venture survival, rather than objective team or firm performance in the short- and long-term.In this paper, we study the influence of team passion on new venture team performance. We draw on theory concerning entrepreneurial passion within venture teams (Cardon et al., 2017) that suggests that different aspects of entrepreneurial passion within teams shape team dynamics and venture outcomes. While generally, theories of passion suggest that entrepreneurial passion is positively related to team outcomes due to the positive emotions it brings about, we find that in teams, the relationships are more complex. While the average level of passion among team members is positively related to team performance when considered alone, this effect is not significant when passion diversity is also considered. Diversity of passion among individual team members has a negative relationship with team performance, including diversity in the level of passion team members experience (intensity separation), as well as diversity in the object of their passion (focus variety). These negatively affect team dynamics due to conflicting emotions and identities among team members associated with passion diversity. We examine these relationships on specific team performance outcomes including evaluation of the business idea in the short-term and venture performance five years after their participation in an accelerator.The sample used in this study includes 107 entrepreneurial teams that were part of an accelerator program in the Netherlands. Teams were evaluated on the quality of their business ideas at the end of the accelerator program and the amount of investment the team had received five years later. Our results provide no support for positive effects of average team passion on the quality of the business ideas and confirm the negative effects of passion intensity separation on the quality of the business idea and the negative effects of passion focus variety on later venture performance.This paper makes several contributions. First, we expand the literature on passion in entrepreneurship, specifically adding to our understanding of passion within new venture teams. More specifically, we contribute to the growing body of evidence concerning potential dysfunctions of passion by uncovering a dysfunctional property of team passion diversity that uniquely manifests itself at the team level of analysis. We contribute to the literature on new venture teams by examining team composition in the form of passion diversity, and its relationship with team performance. Finally, our study extends work on the effects of entrepreneurial passion by looking at objective team performance outcomes in both the short- and long-term.For entrepreneurs, our findings confirm the importance of affect and identity for new venture teams, and specifically our findings indicate that there is a dark side to team passion. While passion is generally positioned as a positive phenomenon, we highlight the negative outcomes that passion can have in the team context. Diversity in the amount of passion team members experience can diminish the quality of the business ideas the team is able to generate in the short-term, while diversity in the focus of team members' passion can diminish the firm's long-term performance. For investors and accelerator communities this research validates the importance of considering entrepreneurial team composition and specifically entrepreneurial passion levels and domains when investing in teams or when supporting venture building.     

Team resilience building in response to co-founder exits

Founding teams often experience the exit of co-founders. To develop theory about how founding teams deal with adversity emerging from the exit of one of their members, we take a team-resilience perspective and study the development of six founding teams. Our inductive model highlights how founding teams take different trajectories following team member exits, leading to different types of psychological closure, which impact the teams' resilience building. Our model also suggests how teams not engaging in distancing from the exit-related adversity experience additional adversity within the continuing team, eventually leading to team failure. Our findings challenge and extend extant studies on exits in founding teams and team resilience.     

CEO Entrepreneurial Leadership and Performance Outcomes of Top Management Teams in Entrepreneurial Ventures: The Mediating Effects of Psychological Safety

This study examines whether the exhibition of entrepreneurial leadership by CEOs within entrepreneurial ventures fosters higher levels of top management team performance and job performance of team members, and whether psychological safety explains such effects. Utilizing four waves of multisource, multilevel data from 262 team members across 56 top management teams, we find that the exercise of entrepreneurial leadership by the CEO leads to higher levels of performance at the team and individual levels, and that psychological safety mediates such relationships.     

Human resource flexibility and strong ties in entrepreneurial teams

Human resource flexibility is important in entrepreneurial ventures that need to respond to the changing challenges of growing the new business. This research investigates the impact of previously well-known people (strong ties) as entrepreneurial team members on the human resource flexibility of new ventures. Data collected from German founding entrepreneurs in technology-oriented, incubator-based firms shows that choosing a well known individual to join the entrepreneurial team increases the founder's ability to modify the team member's work role, but complicates asking the team member to leave the team if required. Hence, strong ties both increase and reduce human resource flexibility. However, the effect of strong ties on role modifiability is statistically significant only with novice entrepreneurs. These research findings counsel founders to discuss role modification and exit during partnership and entrepreneurial team membership negotiations.     

Does negative feedback impact new ventures' organizational identity? The role of founding teams' human capital and feedback source

Although a strong organizational identity (OI) is important for venture success, the impact of negative feedback on a new venture's OI is poorly understood. Drawing on human capital theory we argue that founding teams with more founding and industry experience can more effectively defend OI after negative feedback. Using literature on intra-group bias we further theorize that these benefits of founding and industry experience are more pronounced when feedback emerges from sources external rather than internal to the venture. A multi-period research design and data on 1528 survey responses from 598 members of 81 ventures support our model.     

Cash crisis in newly public Internet-based firms: an empirical analysis

This study examines why, even when financial resource constraints are significantly relaxed, some new ventures struggle to survive while others prosper. Using the data of approximately 200 new Internet ventures that went public during the years 1997 through 1999, we propose that the performance of new ventures is a function of pre-initial public offering (IPO) characteristics. We determined that firm-level characteristics, including top management team (TMT), financial position, networks, and location, are related to the performance of struggling new ventures. We found strong evidence of agency relationships, so that a substantial reduction in equity holdings by the entrepreneurial team is a strong signal of impending crisis. Interestingly, similar reductions by venture capital (VC) backers did not serve as a signal of crisis.     

Entrepreneurial founding team exits in rapidly internationalising SMEs: A double edged sword

Entrepreneurial founding teams (EFTs) are often essential to new venture creation and successful internationalisation. Although the composition of EFTs has been the subject of enquiry, little research exists into the exit of team members and the consequences for rapid internationalisation. We focus on EFT exits in rapidly internationalising small firms and develop categories of EFT exits. We explore the motivations and subsequent impact on internationalisation of case firms to illustrate each category/type of EFT exit. We find that exits are prevalent in the early stages of ventures, and may be either consensual or non-consensual. There are a number of motivations evident and EFT exits are often critical to continued internationalisation. We offer that EFT exits are not always negative, they can allow for the appropriate deployment of resources, extending RBV/KBV as whilst much research effort has been devoted to establishing what new resources/knowledge should flow into a firm, we show that to shed an EFT member and redeploy resources/knowledge can act as a catalyst to further internationalisation. Finally we discuss research, managerial and policy implications.     

University spin-off's performance: Capabilities and networks of founding teams at creation phase

The extant literature highlights that environmental conditions, during the creation phase, imprint on a start-up's survival and growth. However, there are few studies that explore the composite nature of a founding team's capabilities and networks, developed within this phase, and the contribution made to future performance. This paper uses the distinctive context of university spin-offs, where early stage ventures are fostered by institutional interventions, to analyse the influence that the capabilities and networks of a founding team, at incorporation, have upon the future performance of the spin-off. Based on data from 181 university spin-offs, this paper empirically demonstrates that the entrepreneurial capabilities of a founding team, augmented during the ‘creation’ phase, have a positive influence on the performance of a spin-off during the ‘growth’ phase, and that the networks of a founding team indirectly affect a spin-off's performance through the enhancement of a team's entrepreneurial capabilities.     

Team interpersonal process effectiveness in venture partnerships and its connection to perceived success

Many business ventures are started by entrepreneurial teams, and an extensive theoretical literature suggests that the interpersonal process of these teams impact venture performance. Whereas some work has been done to identify key issues in how well such teams work together, there has been no in-depth research to develop an instrument to measure specific dimensions of interpersonal process effectiveness. This article documents the importance of venture business, develops a measure to evaluate venture team interpersonal process effectiveness, and shows the relationship of interpersonal process effectiveness and partner agreement on specific aspects of interpersonal process to reports of venture success.Over 190 venture dyads were surveyed such that each partner evaluated themselves and their partner on items describing team interpersonalprocess. We found four dimensions for team interpersonal process: leadership, interpersonal flexibility, team commitment, and helpfulness. Leadership involved partners who contributed to the leadership functions of problem-solving, setting quality standards, continually improving, and setting goals. Interpersonal flexibility described partner exchange with the other partner. Team commitment meant having enthusiasm for team performance and focusing on common team goals. The final element was helpfulness, which involved helping their partner beyond what was required and being friendly and cooperative.We defined successfully perceived ventures as those in which the two partners independently agreed on evaluating the business to be both growing and profitable. Venture businesses that were described by the partners as not growing and/or not profitable were defined as less successfully perceived ventures. Teams that evaluated themselves as more effective on team interpersonal process also regarded themselves as more successful venture businesses. The factors that were evaluated as more effective in successfully perceived ventures were leadership, team commitment, and their mutual interaction.Our agreement hypothesis held for all three interpersonal perception perspectives. The first agreement correlation is a comparison of partner self-evaluations. The more successfully perceived ventures rated themselves similarly; the less successfully perceived ventures did not. The second agreement correlation was a comparison of what partners thought of each other and is the source of many interpersonal assumptions (Wilmot 1979). Partners from successfully perceived ventures agreed with each other, whereas the less successfully perceived ventures did not. The third agreement analysis was particularly noteworthy. It involved a comparison of one partner's self-rating with how the other partner rated him/her. In addition to mere agreement, this represents an interpersonal verification or validity check between separate perceptual systems. As partners, this correlation suggests that you understand my contribution to the team in the same way that I understand my contribution to the team. When there is agreement on this perspective, miscommunication and interpersonal conflict may become less likely. As with the other two agreement indices, partners from successfully perceived ventures showed more agreement than partners in less successfully perceived ventures. An important notion is the use of these three perspectives to more fully utilize the team effectiveness instrument. Each of the perceptual perspectives is different, and a breakdown in one perspective may not always show in the others. However each view is critical to maintaining effective team interpersonal process.To develop a venture dyad, we suggest using our instrument as a tool to enhance a team's interpersonal process. When using an interpersonal method with venture dyads, there are several issues we should consider. First, team interpersonal process issues can be sensitive topics for discussion. In some cases, relationship building with a third party may be needed for this approach to be constructive. Second, a third party, familiar with team interpersonal process, should have a team meeting with the participants to establish a common vocabulary regarding our team concepts. Third, additional team interpersonal process items could be provided by the team to better fit the idiosyncrasies of each dyad.     

Exploring the Networking Characteristics of New Venture Founding Teams: A Stdy of Italian Academic Spin-off

This paper deals with newly established ventures and their relations with external agents. The founding teams' intention to set up relations with external agents and their frequency of interaction with external agents are addressed as two features that are likely to lead to the success of academic spin-off companies. Empirical analysis is based on a data set of 40 Italian academic spin-offs. The external agents who are most likely to have interactions with academic spin-off companies are first identified. Two research hypotheses are then put forward: (a) that the intention of the founding teams to set up relations with external agents is influenced by the degree of articulation of roles and the completeness of the founding teams; (b) that the founding teams' frequency of interaction with external agents is influenced by the frequency of interaction with external agents of the research groups of origin and by their scientific and technological excellence. Some remarks are then made on the role that universities play in helping new ventures to set up relations with external agents.     

Birds of a feather get lost together: new venture team composition and performance

This study explores the relationship between new venture team composition and new venture persistence and performance over time. We examine the team characteristics of a 5-year panel study of 202 new venture teams and new venture performance. Our study makes two contributions. First, we extend earlier research concerning homophily theories of the prevalence of homogeneous teams. Using structural event analysis we demonstrate that team members?? start-up experience is important in this context. Second, we attempt to reconcile conflicting evidence concerning the influence of team homogeneity on performance by considering the element of time. We hypothesize that higher team homogeneity is positively related to short term outcomes, but is less effective in the longer term. Our results confirm a difference over time. We find that more homogeneous teams are less likely to be higher performing in the long term. However, we find no relationship between team homogeneity and short-term performance outcomes.     

A cross-national study on the impact of management teams on the rapid internationalization of small firms

While the importance of top management teams in the formation and development of new ventures is well recognised, their impact on the rapid internationalization of such firms remains relatively under-researched. This article presents the findings of a cross-national study conducted in Australia, Canada, Ireland and New Zealand that demonstrate the significant impact that such teams have in creating the core internal capabilities and leveraging the external resources required for rapid and dedicated internationalization. The need to augment the management team in order to address key resource or knowledge gaps and/or to expand international networks is also evident among many firms, as is the impact of changes in team structures on business strategy and internationalization. Directions for future research and implications for public policy in support of rapidly internationalizing small firms are presented and discussed.     

Individual Priming in Virtual Team Decision-Making

Virtual teams have different interactions than face-to-face teams because they rely on information and communication technologies, which can impede or assist certain human cognitive processes. Past research has shown that although virtual teams exchange more information than face-to-face teams, poor decisions often result, because team members do not consider the unique information they receive from others. Drawing from cognitive psychology, our research explored a unique way to improve team decision-making through the use of cognitive priming. We proposed that priming group members to pay attention to others or to engage in counterfactual thinking would improve team members’ cognition and, therefore, team performance. Prior research with individuals and brainstorming teams has shown these forms of priming to improve performance; however, no research has attempted to use priming to improve the outcomes of virtual team decision-making, which requires deeper interaction and cognitive involvement than brainstorming. We performed two lab experiments using primes that have been found to improve the individual decision-making process. We found that priming had some impact, but it did not significantly improve decision quality. Various reasons are discussed to explain why priming techniques may not be as powerful in teams as in individuals, and future research ideas are suggested to build on our initial work on priming in virtual team decision-making.     

Founding scale and survival: double-edged effects of corporate sponsorship

This study examines the effects of founding scale on survival rates across independent and corporate-sponsored Taiwan securities firms. Empirical results confirm the positive effects of founding scale and corporate sponsorship on new venture survival. Results also indicate that when founding scale is large, corporate-sponsored new ventures have higher survival rates than independent ventures. However, when founding scale is smaller, the reverse is true: corporate-sponsored new ventures have lower survival rates than independent ventures. Therefore, corporate sponsorship comes off as a double-edged sword; new ventures may benefit from the parent's existent resources and social linkages, but also suffer from a loss of autonomy and control over major decisions.     

Linking prefunding factors and high-technology venture success: An exploratory study

This study reports on the exploratory phase of a research project on prefunding factors influencing the success of high-technology start-up companies. The study was done in collaboration with two major West Coast venture capital firms that allowed the authors full access to the due diligence files, investment proposals, and closing documents associated with eight ventures. Half of the eight ventures studied are currently public companies with sales that range from $65 million to $500 million and with an after-tax profit of about 10% of sales. The other half have either been dissolved or did not reach $3 million in sales within the five years following their funding.Information was obtained on those prefunding factors that were available for investor review prior to funding, such as the founders track records, the characteristics of the founding team, the nature of the target market, the technological strategy of the firm, the proposed composition of the board, and the deal structure.In spite of the small sample size, findings of this research revealed discernible differences between successful and unsuccessful firms. The founders of the successful ventures had more prior experience working together; tended to form larger, more complete teams; and had more extensive experience in the function they performed in the new venture. Successful founders also had experience in rapid growth firms that competed in the same industry as the start-up.The successful ventures targeted product-market segments with high buyer concentration in which, through technological advantage, their products could attain and sustain a competitive edge. Often this advantage was achieved by careful management of the product-development process, which resulted in early market entry and its corollary, reduced competition.On the other hand, some factors that the authors had predicted would allow them to distinguish between success and failure were not found to do so. Both successful and unsuccessful ventures targeted high growth markets, anticipated high gross margins, had founders with over five years of relevant experience, had experienced venture capitalists on their boards, and were characterized by a wide range of founder equity shares.     

Outside Board Members in High Tech Start-ups

Board composition in large organizations has been subject to much empirical research, however, little attention has been focused on board composition in start-ups, and more specifically high tech start-ups. This lack of research is surprising given that many high tech start-ups have multiple equity stakeholders such as venture capitalists or public research organizations, such as universities. Given that high tech start-ups are commonly resource-poor these external stakeholders may play an important role in accessing critical external resources. Drawing on agency theory, resource dependence theory and social network theory we examine the tensions that exist between the founding team and external equity stakeholders in determining the presence of outside board members. In particular we focus on whether or not the outside board members have either complementary or substitute human capital to the founding team. We test our model on a sample of 140 high tech start-ups in Flanders. Our results indicate that high tech start-ups with a public research organization as an external equity stakeholder are more likely to develop boards with outside board members with complementary skills to the founding team.      

Making sense of entrepreneurial exit strategies: A typology and test

Entrepreneurial exit is a major event in the development of a venture. However, we have little understanding of the factors that drive the development of an important pre-cursor to exit: the exit strategy of the founder. Based on the existing literature, we develop a typology of entrepreneurial exit strategies consisting of three higher-level exit categories (i.e., financial harvest, stewardship, and voluntary cessation) and develop an initial test of our typology. Specifically, we examine entrepreneurs' perceived innovativeness of their opportunity, motivational considerations, decision-making approach, founding team, and firm size. Our results show different predictors for each of the three exit strategy types and represent a significant contribution to the understanding of exit strategies in new ventures.