How Do Founding Teams Form? Towards a Behavioral Theory of Founding Team Formation

Abstract

We advance entrepreneurship research by developing a theoretical model of how founding teams form and dynamically evolve via episodic addition and exit of cofounders. Our neo-Carnegie model situates founders in particular network-structural milieu, engaging in aspiration-driven search for and evaluation of prospective cofounders. Founding team formation is a consequence of mutually favorable evaluations in a multi-sided matching process. Founding team churn emerges as a consequence of shifting dominant coalition dynamics driven by organic venture evolution and intentional changes in strategic direction. Our multi-level model provides new insights on formation pathways of founding teams – both prior and subsequent to opportunity identification, teams’ initial task and relational endowments and their dynamic evolution.