Academic journal article Entrepreneurship: Theory and Practice

Entrepreneurial Founder Teams: Factors Associated with Member Entry and Exit

Academic journal article Entrepreneurship: Theory and Practice

Entrepreneurial Founder Teams: Factors Associated with Member Entry and Exit

Article excerpt

This exploratory study provides a review of the neglected area of entrepreneurial founder team turnover. A novel distinction is made between entrepreneurial founder team member entry and team member exit. Ninety owner-managed ventures were monitored between 1990 and 2000. Presented hypotheses relating to a team's human capital were explored using multivariate logistic regression analysis. Variables associated with entry were found not to be the same as those associated with exit. The size of the founding team was significantly negatively associated with subsequent team member entry. The link between team turnover and entrepreneurial team heterogeneity was mixed. Functional heterogeneity was weakly significantly positively associated with team member entry. Heterogeneity of prior entrepreneurial experience was significantly positively associated with team member exit. In addition, family firms were significantly negatively associated with team member exit. The average age of the team was not significantly associated with team member entry or exit. Additional insights in future research may be gathered if a broader definition of team turnover (i.e., considering team member entry and exit) is considered. Practitioner awareness of the different factors associated with team member entry and exit may encourage them to provide assistance, which facilitates the team building process over time in developing firms. Promising areas for additional research are highlighted.

Introduction

Gartner et al. (1994) argued that the "entrepreneur in entrepreneurship" is typically plural, not singular. Only recently has the entrepreneurial team phenomenon received explicit attention (Ensley, Carland, & Carland, 1998, 2000; Ensley et al., 1999). Entrepreneurial founder teams (EFTs) may provide a venture with access to an array of valuable financial, social, and human capital resources (Kor & Mahoney, 2000). Each team member adds to the diversity of views and skills, and can enable the completion of complex tasks. The presence of an EFT can play a pivotal role facilitating business development and superior business performance (Roure & Madique, 1986; Kamm & Shuman, 1990; Westhead, 1995). Subsequent changes in the EFTs have been noted (Cooper & Daily, 1997). Cooper and Bruno (1977) detected that 48% of surveyed high-technology firms reported that at least one founder had left the surveyed ventures. Boyd and Gumpert (1983) found that more than two-thirds of founders starting with partners eventually dissolved ties. Further, Timmons (1990) focusing upon high-potential ventures noted that almost every new firm had lost at least one founder over a five-year period.

Changes in senior managers have been explored in studies focusing upon top management team (TMT) turnover. These studies have focused on large established firms and have explored turnover with regard to organizational strategy and performance (Hambrick & Mason, 1984; O'Reilly, Cardwell, & Barnett, 1989; Jackson et al., 1991). TMT turnover can be viewed as a strategy of adaptation linked to changing external environmental conditions (Furtado & Karan, 1990; Wiersema & Bantel, 1992, 1993). Also, TMT turnover may encourage the successful turnaround of a business (Kesner & Dalton, 1994). For example, poor business performance can preempt TMT turnover in large corporations. In addition, the announcement of changes to a company's TMT can impact its share price (Furtado & Karan, 1990).

In sharp contrast to larger established firms, the issue of management turnover has been neglected in the context of independent private firms owned by EFTs. The relationships found with regard to TMTs in larger established firms may not necessarily hold for EFTs in independent private firms. Two features of EFTs suggest that their turnover will be distinctive. First, there are important differences in ownership and control between larger established firms and newer independent private firms. …

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