Born into Chaos: Performance Impacts of Founding Team Composition and the Role of the Founding Environment
33 Pages Posted: 25 Mar 2016 Last revised: 22 Nov 2016
Date Written: November 10, 2016
How does a firm’s founding environment shape its founding team’s ability to drive performance? Although upper echelon research predicts that having a diverse top management team is beneficial in a turbulent industry environment, in contrast, we argue that environmental turbulence at founding might hamper a team’s performance in the long run. Using a sample of 1,383 firms, we find that a turbulent founding environment significantly lowers the chance of favorable exit for firms with diverse founding teams. That relationship is particularly pronounced for firms whose environment stabilized over time and for firms with quick product cycles. Our results suggest that founders need to be aware of the long-term impacts of matching team composition to the founding environment. We also call for more attention toward the role of founding conditions in shaping the team-performance relationship.
Keywords: founding environment, founding team, functional diversity, imprinting, firm performance
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