Founding team homogeneity and network positioning: The moderating role of environmental and organizational factors

ABSTRACT

Organizations with homogeneous founding teams have strong motivation to reach out to diverse network resources by occupying a structural hole position to overcome the lack of heterogeneity within their teams. However, whether those organizations can occupy such a network position is contingent on environmental and organizational factors. We find that a firm’s founding team homogeneity is positively related to the occupancy of a structural hole position. However, this relationship is weakened when this firm operates in a community with strong localism or when the firm's founding team has a higher proportion of immigrant members, whereas the relationship is strengthened by local partnership experience of the firm.

KEYWORDS:

• Founding team
• homogeneity
• network position
• environmental factor
• organizational factor

Notes

¹ See http://www.archive.org/.

² Even though the measures of localism and LPE are both built on the E-I index (Krackhardt & Stern, 1988), the two concepts differ in their conceptual level of analysis. Localism is a concept referred at a community level, whereas LPE is conceptualized at the firm level. In particular, localism is operationalized by aggregating all first-time VC coinvestments into a community. As a result, localism captures the collective inward-looking tendency of establishing coinvestment relationships with other local partners within the community as opposed to extending co-investment relationships with non-local VC firms in other communities. By contrast, LPE is a firm-level concept that is captured by a focal VC firm’s commitment to establish coinvestment relationships with other local VC peers contrary to extending coinvestment relationships with nonlocal VC firms, which leads to the accumulation of locally rooted knowledge and experience. Viewed in this light, LPE signals the commitment of the focal VC firm to developing and exploiting local knowledge and networks.

³ See www.bea.gov.

⁴ We appreciate the comment from one anonymous reviewer who made this point and provided detailed instructions for us.