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The “heroic” team Founding team characteristics and the effect on new venture performance

Bachelor thesis research by Joyce Kox

 

In December 2014 Joyce Kox graduated from the Tilburg School of Economics and Management at Tilburg University. Joyce followed the bachelor International Business Administration and wrote her bachelor thesis in the area of entrepreneurial teams.

There is a growing interest in entrepreneurial teams, because of the simple reason that new ventures are oftentimes not founded by one individual, but by a team of individuals. An entrepreneurial team is defined as “two or more individuals who have a significant financial interest and participate actively in the development of the enterprise” (Cooney, 2005: 229). The entrepreneurial team is one of the most valuable assets of a new venture and team characteristics might influence new venture performance. Entrepreneurial ventures are an important driver of economic growth and since there is relatively little research about entrepreneurial teams it is interesting to explore the relation between entrepreneurial teams and new venture performance. Hence, the research question of this bachelor thesis is: To what extent do team founding characteristics account for the variance in new venture performance? Based on this question a literature study has been carried out.

In this bachelor thesis the characteristics: size, team tenure, heterogeneity, the level of knowledge and experience, the teams network, and social capital entrepreneurial team are examined in relation with new venture performance. A start-up with multiple founders can benefit from functional specialization, but should be cautious that the disadvantages like conflict do not outweigh the benefits. Entrepreneurial teams need to go through a development process before becoming effective. Therefore, if a team has spent some time working together, they already have established and adequate ways of working and become more effective in decision-making, which increases their survival rate and success. The entrepreneurial environment is characterized as dynamic, innovative and novel. Founding teams benefit, in terms of performance, from fast-decision making rather than diverse perspectives from partners on important issues. Therefore, a homogeneous team is more advantageous compared to a heterogeneous team. Evidence points to the effect that new ventures could benefit from start-up experience in the early phases, because it provides knowledge about necessary activities and roles during the founding phase (Delmar & Shane, 2006). There is no support to assume that industry experience of partners in the entrepreneurial teams helps new ventures. In addition, new venture performance will benefit from a broad array in functional experience. The role of networks and social capital is important for entrepreneurial teams. Founders rely on their personal networks when building the new venture. In order to benefit from multiple founders, start-ups need to ensure that their social capital bridges networks and creates synergies. Finally, is important to participate in networking activities to increase performance.

(Future) entrepreneurial teams can influence their success and survival by establishing a good team at the time of founding. Key takeaways are that 1) founders should not form a team on an ad hoc basis but pay attention to the establishment, 2) new venture teams should consist of partners who have some prior working experience with each other, 3) teams should select members with some entrepreneurial experience, and 4) Entrepreneurial teams should analyze the networks of the partners and makes sure that the networks do not overlap, but that the networks bridge structural holes or find ways to expand it.

Cooney, T. M. (2005) What is an entrepreneurial team? International Small Business Journal, 23(3), 226-235.

Delmar, F., & Shane, S. (2006). Does experience matter? The effect of founding team experience on the survival and sales of newly founded ventures. Strategic Organization, 4(3), 1476-1270.