Born into Chaos: The Performance Impacts of Founding Team Composition and the Role of the Founding Environment

Abstract

We examine how a firm’s founding environment shapes the performance impact of its founding team. Using the context of young ventures, we theorize that the market volatility at firm inception greatly alters the way in which a functionally heterogeneous founding team drives future performance compared with a homogeneous team. We find moderating effects in opposite directions for different performance outcomes: if a firm with a heterogeneous founding team was founded in a volatile environment, it is both more likely to achieve success and more likely to fail. We suggest that the breadth of one’s innovation strategy is a differentiator between the ventures that benefit from those founding conditions and ventures that are harmed. Our results provide impetus for a more nuanced interpretation of founding effects.