Diversity and Performance in Entrepreneurial Teams

55 Pages Posted: 21 Aug 2021 Last revised: 27 Oct 2021

See all articles by Sophie Calder-Wang

Sophie Calder-Wang

University of Pennsylvania - The Wharton School

Paul A. Gompers

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Kanyuan (Kevin) Huang

University of California, Los Angeles (UCLA), Anderson School of Management, Students

Multiple version iconThere are 2 versions of this paper

Date Written: October 25, 2021

Abstract

We study the role of diversity on the performance of entrepreneurial teams by exploiting a unique experimental setting of over 3,000 MBA students who participated in a business course to build startups. First, we quantify the strong selection based upon shared attributes when students are allowed to choose teammates. Team formation based upon shared endowed demographic characteristics such as gender, race, and ethnicity is stronger than team formation based upon acquired characteristics such as education and industry background. Second, when team memberships are randomly assigned, greater racial/ethnic diversity leads to significantly worse performance. Interestingly, the negative performance effect of diversity is partially alleviated in cohorts where teams are formed voluntarily. Finally, we find that teams with more female members performed substantially better when their faculty section leader was female. These findings suggest that policy interventions targeting greater diversity should consider match-specific qualities in forming teams to prevent the potential negative impact of diversity. Our results on vertical diversity suggest that capital allocators could also play an important role in the mentoring and advising of minority entrepreneurs.

Keywords: Diversity, Gender, Minorities, Entrepreneurship

JEL Classification: J1, J15, J16, M12, M13, M14

Suggested Citation

Calder-Wang, Sophie and Gompers, Paul A. and Huang, Kanyuan, Diversity and Performance in Entrepreneurial Teams (October 25, 2021). Available at SSRN: https://ssrn.com/abstract=3908020 or http://dx.doi.org/10.2139/ssrn.3908020

Sophie Calder-Wang (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Paul A. Gompers

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)

Harvard University - Entrepreneurial Management Unit ( email )

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Kanyuan Huang

University of California, Los Angeles (UCLA), Anderson School of Management, Students ( email )

Los Angeles, CA
United States

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