Team Heterogeneity in Startups and its Development Over Time

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummaryManagement scholars predominantly advocate that startup teams should consist of members with different rather than similar backgrounds. Such heterogeneous team members are supposed to bring in a greater variety of perspectives and more creativity which in turn leads to better team performance. There are also, however, also downsides connected with workforce heterogeneity like affective conflict or coordination cost which may make people "homophile", i.e. inclined to bound with others with similar characteristics.Existing empirical studies have, however, come to quite divergent findings regarding the relationship between team heterogeneity and firm performance. These studies are often based on very small and highly selective samples.We investigate workforce heterogeneity of startups with respect to education, age and wages using data on the population of Danish firms founded in 1998 which we follow until 2001. This allows us to also analyze changes in workforce composition over time, a topic hitherto unexplored in the literature due to binding data constraints.As a methodological contribution, we construct a simulated benchmark with randomly matched teams to which we compare the observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our benchmark situation. We also document that workforces become more heterogeneous over time -startups add workers with skills different from the workforce at startup. The initial supposedly "poor" mix of workforce characteristics is hence adjusted as the startup matures. This increase in workforce heterogeneity is, however, smaller than in a situation in which startups add new employees randomly. Our results hold both for knowledge-based non-knowledge-based startups although knowledge-based startups tend to be more heterogeneous in characteristics than non-knowledge-based startups. Das Wichtigste in Kürze AbstractWe investigate the workforce heterogeneity of startups with respect to education, age and wages. Our explorative study uses data on the population of 1,614 Danish firms founded in 1998. We track these firms until 2001 which enables us to analyze changes in workforce composition over time. Such a dynamic analysis constitutes a hitherto neglected area of entrepreneurship research. To assess relative workforce heterogeneity, we construct a simulated benchmark to which we compare observed workforce heterogeneity. We find that the initial workforce is rela...

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