How Founding Teams’ Diversity Shapes Culture and Impacts Venture Success
Research Paper Title:
“A founding-team model of creating a venture's culture”
Authors:
Background:
A firm’s culture is important for employees as well as other stakeholders. When founders found and develop their start-ups, they will also create its culture. Because founders often work in founding teams, the authors argue that the team composition can shape culture creation. Specifically, the team composition in terms of the cognitive diversity, that is, to what extent team members differ in the way how they think, shapes how founding team members produce cultural information and venture members interpret this information. In this process in which cultural information is transmitted across the venture, the venture’s culture emerges.
Highlights:
Culture is shaped by cultural information produced by founding teams and interpreted by venture members.
The interpretation of cultural information can shape the future production of information.
The founding team’s cognitive diversity impacts the production of cultural information.
The founding team’s cognitive diversity shapes the development of faultlines within the venture.
Culture creation impacts the venture’s access to resources for growth.
Methodology:
Theoretical Research
Hypothesis:
Proposition 1a. Through enhanced team information surfacing processes, founding teams with greater cognitive diversity produce a more diverse set of cultural information for their ventures than those with less cognitive diversity.
Proposition 1b. Through limited team information combination processes, founding teams with greater cognitive diversity produce a less diverse set of cultural information for their ventures than those with less cognitive diversity.
Proposition 2a. Through enhanced team information surfacing processes, founding teams with greater cognitive diversity produce cultural information for their ventures less quickly than those with less cognitive diversity.
Proposition 2b. Through limited team information combination processes, founding teams with greater cognitive diversity produce cultural information for their ventures less quickly than those with less cognitive diversity.
Proposition 3a. A more diverse set of cultural information produced for a venture is interpreted less consistently by the overall body of venture members than a less diverse set of cultural information.
Proposition 3b. A more quickly produced set of cultural information for a venture is interpreted more consistently by the overall body of venture members than a less quickly produced set of cultural information.
Proposition 4a. Cultural information that is interpreted more consistently by the overall body of venture members can reduce the diversity of cultural information produced by a founding team in the future than cultural information that is interpreted less consistently.
Proposition 4b. Cultural information that is interpreted more consistently by the overall body of venture members can increase the speed at which cultural information is produced by a founding team in the future than cultural information that is interpreted less consistently.
Proposition 5. Founding teams with greater cognitive diversity generate more extensive fault-lines within their ventures than founding teams with less cognitive diversity; these fault-lines diminish the interpretation consistency of cultural information across the overall body of venture members.
Proposition 6. Cultural information that is interpreted more consistently by the overall body of venture members facilitates the creation of a venture's culture than cultural information that is interpreted less consistently.
Proposition 7. The extent to which a venture has created a culture is positively related to the venture's legitimacy for accessing resources.
Results:
The model developed in the paper explains why some ventures can develop a culture more quickly than others. A quick development of the venture’s culture is important for the venture because it helps to get quick access to resources for growth.
While prior work has assumed that individual founders create their venture’s culture, the model highlights the role of the founding team for the creation of culture. In particular, the founding team’s cognitive diversity can facilitate and inhibit their production of cultural information.
The paper sheds light on the venture-internal social processes and dynamics in the creation of a new venture’s culture. So, it complements work on the emergence of culture which tends to ignore these micro-level mechanisms.
While research on cultural dynamics has studied how cultural information is transmitted, it has not sufficiently explained how the process of transmission is started. The model developed in the paper explicitly includes characteristics of the entity that produces cultural information. Thus, it highlights that differences across these entities can shape the transmission of cultural information.
Conclusion:
This paper focuses on a founding team's creation of their venture's culture. Specifically, we explore how a founding team's cognitive diversity shapes the production and transmission of cultural information for the creation of a venture's culture and how creating a venture's culture influences venture outcomes (i.e., the reliability, legitimacy, and stakeholder engagement necessary for venture growth). Our model offers an initial step toward a cross-level explanation of culture creation in new ventures. We hope this paper leads to more research on the creation and impact of ventures' cultures.