Reliability and risk in new ventures: Founding team's native immigrant composition and performance variability

Abstract

The study examines the performance and the risks of new ventures founded by hybrid teams consisting of immigrants and natives. Earlier investigations have taken a dichotomous view of immigrants in the founding team without paying sufficient attention to their relative numbers. We argue that the numeric strength of immigrants in the founding team affects firms' average performance. Furthermore, as entrepreneurial endeavors are risky, we examine the native/immigration effect on the new venture performance variability. Using new venture data from the Kauffman Firm Survey, we find that the ratio of natives in the founding team is associated with lower mean performance and higher risk in the short and medium term. This means a higher relative number of immigrants in the founding team is associated with higher average performance and lower risk. We further find that the average team age is negatively associated with the short- and medium-term mean performance while positively affecting the short-term performance variability. A higher male–female ratio is positively associated with performance but not with variability.