Entrepreneurial team formation and its effect on subsequent entrepreneurial outcomes

University Of Maryland, College Park, College Park MD

Investigators

Abstract

Entrepreneurs, investors, and governments have long recognized that an inability to organize effectively is a primary cause of entrepreneurial failure. However, we lack systematic evidence on the types of strategies entrepreneurs should use when forming their teams. This project will investigate how initial team formation affects entrepreneurial outcomes. To what extent does team formation determine the level of specialization, coordination, and trust between team members? Do these processes affect team ability to change direction over time? Is it better to form teams with family members, or with friends or co-workers? Does the best strategy change with context, such as different countries or industries? Findings from this project will provide practical advice to early stage entrepreneurs helping to increase the survival of young firms, thus promoting economic development in our society. The project pairs an archival study with a randomized control trial to evaluate how variations in team composition affect entrepreneurial outcomes. The first study follows technology-based startup teams in multiple iterations of a prestigious entrepreneurship contest. Over a period of eight months, teams seek to pass three competition rounds that weed the number of teams from 130 accepted teams to 30 semi-finalists to 12 finalists. The finalists present their ventures to venture capitalists. Data on team formation and interpersonal dynamics, along with demographic attributes, are collected through multi-source surveys over time. The second study, a randomized controlled trial, manipulates team formation processes to identify causal relationships between entrepreneurial team formation and outcomes. In a quasi-experimental setting comprised of multiple sections of an introductory semester-long entrepreneurship course, students pitch ideas, form teams and then start and run actual businesses. Team success will be evaluated in terms of actual profits and other measured milestones. This project will inform the field regarding whether it is worthwhile to intervene and facilitate team formation processes, or allow teams to form more organically. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.