Jewels in the crown: Exploring the motivations and team building processes of employee entrepreneurs

Abstract

Research Summary This study examines motivations and team building processes of employee entrepreneurs in the disk‐drive industry. Our inductive, grounded theory building approach uncovers that ringleaders—founders who spearhead spinout creation—are driven by a nonpecuniary desire to create in a fertile environment, when they encounter frictions within the parent firm. Cofounders share the desire to create, but ensure departure on good terms to retain the option of returning to paid employment as a safeguard against entrepreneurial risk. We uncover an endogenous team building process in which more successful founding teams engage in “workplace instrumentality”—creating workplaces through deliberate selection of cofounders who have complementary functional knowledge, but are similar in that they possess superior problem‐solving abilities, best‐in‐class talent, and common workplace values. Managerial Summary The paper examines the motivations and founding team building processes of individuals who leave existing firms to create new ventures. In contrast to conventional wisdom that suggests preformed teams working on innovation projects leave together, we find founding teams are created when a “ringleader” chooses to venture out and subsequently seeks out cofounders. Ringleaders and cofounders alike are motivated by a desire to create given fertile opportunities and care deeply about equity, but ringleaders additionally experience at least one organizational push factor. Almost all founding teams are created to ensure the presence of complementary, functional knowledge. However, more successful spinouts also select cofounders who are hands on problem‐solvers, best‐in‐class talent, and who share common workplace values.

Entrepreneurship Education: Team Composition in Known Worlds and New Frontiers

“…To specify the relationship between team composition and performance in entrepreneurship education settings, we consider how a team's value consensus, defined as the extent to which team members share work-related values (Jehn, 1994), informs their performance as a team. Recent (e.g., Lazar et al, 2020;Shah et al, 2019) and previous work has pointed to the role of shared values in developing emotional attachment, trust, and cohesion within entrepreneurial teams (e.g., Francis & Sandberg, 2000;Ruef et al, 2003;Ucbasaran, Lockett, Wright, & Westhead, 2003). This kind of homophily (i.e., similarity in team members' characteristics) encourages more interpersonal attraction, trust, and understanding than exists among dissimilar members (Ruef et al, 2003;Shah et al, 2019).…”

“…Recent research (e.g., Lazar et al, 2020;Shah, Argawal, & Echambadi, 2019) also illustrates that in addition to considering contextual elements like task-type, it can be helpful to think along which compositional dimensions teams can benefit from similarity as opposed to diversity. For example, Shah et al (2019) show that successful teams couple complementary (i.e., diverse) knowledge and skills with similarity in superior problem-solving abilities, talent, and shared workplace values. In their study, common values helped guide how teams worked together and helped foster trust and cohesion.…”

“…While there are some distinct similarities between entrepreneurial teams and entrepreneurship education learning teams, such as the topic/context (entrepreneurship) and the small team size, there are also some notable differences to consider. These differences include team tenure (i.e., how long the team is together), how the team is formed (Lazar et al, 2020;Shah et al, 2019), tie strength (Aldrich & Zimmer, 1986), social capital of ties (Davidsson & Honig, 2003), and age of social ties (Hellerstedt, 2009). We primarily focus on small teams within the context of an entrepreneurship education in the article; however, we return to discuss the implications to entrepreneurial teams research in the conclusions and limitations.…”

Costs of collective wisdom: How resources influence information aggregation in organizational decision making

“…Although all individuals in the organization have a nonzero chance to be included in the final decision, they are more likely to be included if they are closer to the central agent. Basing inclusion on proximity of expertise is in line with evidence that managers often start new projects by recruiting others with similar knowledge (Bunderson, 2003;Shah et al, 2019). Expending resources on inclusion allows the organization to include socially distant members into the decision-making unit, thereby increasing the unit's knowledge diversity.…”

Information frictions and entrepreneurship

“…Among contextual factors, work environments characterized by dissent drive some employees into entrepreneurship (e.g., Freeman, 1986; Carnahan et al, 2012) 2 . Klepper and Thompson (2010) document “disagreements among leading decision makers concerning fundamental ideas about technology and management that prompt dissidents to leave and start their own firms.” Shah, Agarwal and Echambadi (2019) find that interpersonal and ethical frictions within organizations push employees to spin out their own ventures. Similarly, Klepper (2007) shows that automobile manufacturers experiencing more disagreements between management and employees spun out more startups.…”