Tuesday, December 1, 2015

How do Entrepreneurial Founding Teams Allocate Task Positions?

JUNG HeeJung, VISSA Balagopal, PICH Michael
Read the working paper
INSEAD Working Paper 2015/95/EFE/TOM

How do founding team members allocate task positions when launching new ventures? Answering this question is important because prior work shows both that founding team members often have correlated expertise, thus making task position allocation problematic; and initial occupants of task positions exert a lingering effect on venture outcomes. We draw on status characteristics theory to derive predictions on how co-founders’ specific expertise cues and diffuse status cues drive initial task position allocation. We also examine the performance consequences of mismatches between the task position and position occupant. Qualitative fieldwork combined with a quasi-experimental simulation game and an experiment provides causal tests of the conceptual framework. We find that co-founders whose diffuse status cues of gender (male), ethnicity (white) or achievement (occupational prestige or academic honors) indicated general ability were typical occupants of higher ranked positions, such as CEO role, within the founding team. In addition, specific expertise cues that indicated relevant ability predicted task position allocation. Founding teams created more financially valuable ventures when task position occupants’ diffuse status cues were typical for the position; nonetheless position occupants with high diffuse status cues also appropriated more of the created value. Our results inform both entrepreneurship and status characteristics literature.