Falling Not Far from the Tree: Entrepreneurs and Organizational Heritage

Abstract

Past research has shown that founders bring important capabilities and resources from their prior employment into their new firms and that these intergenerational transfers influence the performance of these ventures. However, we know little about whether organizational practices also transfer from parents to spawns, and if so, what types of practices are transferred? Using a combination of survey and registrar data and through a detailed identification strategy, we examine these two previously unaddressed questions. Our results provide strong evidence for organizational heritage in practices. About 70% of the comparisons of start-ups and other established organizations are less similar than the average similarity between a parent organization and its spawn and that the overlap in organizational practices is almost 10% greater between a spawn and its parents than between the spawn and other established firms. Our further investigation shows that not all practices seem to find their way into the new entrepreneurial firms. In particular, practices that are valuable for and fit with the requirements of a start-up organization, and at the same time are more clearly defined and casually less ambiguous, are more likely to be transferred by the founders from their previous employers. These results contribute to our understanding of how entrepreneurs assemble their organizations and practice innovation as well as the diffusion of practices and the origins of firm heterogeneity.

The organizational design of entrepreneurial ventures

“…In this area, bridging the individual and firm levels of analysis seems again a very promising research avenue. For example, Feldman et al () move along this line. They explore how founders transfer a wide array of practices relating to employment, communication, collaboration, and decision making taken from their previous employers to their new ventures.…”

“…For example, Wasserman () carefully chronicled a set of dilemmas that founders face in deciding to launch a venture, build a team, and attract stakeholders. A handful of studies have examined traditional constitutive elements of organizational design, such as organizational structure (Ferguson, Cohen, Beckman and Burton, Sørensen, & Dobrev, ), hierarchy (Colombo & Grilli, ), task allocation (Jung, Vissa, & Pich, ; Katila, Thatchenkery, Christensen, & Zenios, ), functional specialization (Beckman & Burton, ), role formalization (Mathias & Williams, ; Sine, Mitsuhashi, & Kirsch, ), decision rights (Hellmann and Wasserman, ; Fattoum‐Guedri, Delmar, & Wright, ; Souitaris, Zerbinati, Peng, & Shepherd, ), and the adoption of managerial practices (Cardon & Stevens, ; Feldman, Ozcan, & Reichstein, ). As two recent literature reviews reveal, the empirical evidence on the antecedents and consequences of organizational design choices in entrepreneurial ventures is both limited and mixed and there is still much to be learned (Colombo, Rossi‐Lamastra, & Matassini, ; DeSantola & Gulati, ).…”

Local Prior Employment and Ecosystem Dynamics

“…The PLACE: RTP database includes detailed information about each founder’s work history prior to the date of founding the new firm, including the prior firm names, locations, and start and end dates for each prior employment episode. Entrepreneurial imprinting is directly correlated with time spent in prior employment (Feldman et al, forthcoming). We carefully constructed categories of founder work experience that reflect the region’s varied entrepreneurial pathways and identified four core categories of local work experience: 1) work at one of the region’s three large research universities (Duke University, North Carolina State University, and the University of North Carolina at Chapel Hill); 2) work at one of the region’s prominent pharmaceutical corporations (GlaxoSmithKline, 3 Pfizer, Dupont, Eli Lilly, and Ciba-Geigy); 3) work at a local branch of one of 19 non-pharmaceutical multinational corporations (IBM, GE, Monsanto, Abbott, Hospira, Biogen, Grifols, Merck, Sony, Ericsson, Sony Ericsson, EMC, Data General, Nortel, Teleflex, Becton Dickinson, Bayer, Aventis, and BASF); and 4) work at one of the region’s previously established entrepreneurial life science firms.…”

“…This factor suggests the need to look at the types of organizations that are prevalent in a region, and how their dynamics can influence and shape entrepreneurial opportunity and vibrancy. Organizations imprint individuals with organizational logics, knowledge, and expectations that shape the ways in which new firms are organized and affect the profitability and success of new ventures (Feldman, Ozcan, and Reichstein, forthcoming). The strength of this imprinting is related to the duration of employment at various pre-entrepreneurial experiences, with any single individual having a variety of experiences and any founding team blending a mix of backgrounds.…”

Meeting Its Waterloo? Recycling in Entrepreneurial Ecosystems After Anchor Firm Collapse

“…Working at innovative firms helps employees build their own technical and entrepreneurial skills, which they bring with them to their subsequent employers, making them more productive (Tambe and Hitt 2014;Braun et al 2017). These actors bring with them technical and business insights, market knowledge, ties to customers and suppliers, and knowledge of organizational routines they acquired at their former employers (Feldman Ozcan and Reichstein 2019).…”