Focus or Diversify? Aligning Founding Teams with Strategy and Environment

Seminar by Chuck Eesley, Assistant Professor, Management Science & Engineering Department, Stanford University

Abstract:

We examine how innovation strategy and commercialization environment impact the performance of varying configurations of founding teams. While prior work on the characteristics of top management teams has typically found that diverse teams are more highly performing, we advance a view of founding team alignment with new venture strategy and environment. Using unique data from a novel survey of 2,067 firms founded over five decades, we show the conditions within which technology-focused versus diverse founding teams outperform. Our contribution is identifying the performance implications of founding team alignment with concrete strategies – i.e., innovation v. imitation, and competition v. cooperation. Strategy and environment significantly influence optimal founding team composition. These results cast doubt on predictions of the life-cycle perspective that ventures can professionalize over time to fit their strategy.