Newness and Novelty: Relating Top Management Team Composition to New Venture Performance

Abstract:     
It is argued that the tasks of new venture topmanagement teams vary with new venture novelty. Novelty is distinguished fromnewness--i.e., a novel firm must not necessarily be a new one. Because of theliabilities of being "different," the information processing demandsput on these top management teams present unique challenges. Data were collected on 174 U.S. high-potential new ventures founded between1983 and 1988, which issued initial public offerings prior to being six yearsold. Results show that, as venture novelty increases, the informationprocessing requirements change. One change was an increased need forface-to-face interaction. Hence, a team that can engage in rich, opencommunication should perform better. Also, more homogeneous teams were found to perform better than heterogeneousteams in highly novel ventures due to the need for increased behavioralintegration. Hence, a coordinated and creative effort is hindered by increasingheterogeneity. This is in contrast to the view that increasing heterogeneity isassociated with increasing creativity. An explanation for this may lie in adifference of contexts--e.g., strategic adaptation by existing firms is not thesame as the initiation of new products by new ventures. (LKB)

Keywords: Experimental/primary research, Novelty, Firm performance, Sociodemographic characteristics, Interpersonal communication, Communication in management, Startups, Management teams, Information processing, Coordination

Accepted Paper Series