Does founding team composition influence external investment? The role of founding team prior experience and founder CEO
- PDF / 856,356 Bytes
- 20 Pages / 439.37 x 666.142 pts Page_size
- 96 Downloads / 212 Views
Does founding team composition influence external investment? The role of founding team prior experience and founder CEO Tali Hadasa Blank1 · Abraham Carmeli2 Accepted: 10 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Entrepreneurship research examines the nature and diversity of founding teams’ prior experience to understand its influence on the new ventures’ growth, which is often measured in terms of the latter’s capacity to raise capital (i.e., external investment). Founding teams operating in the high-tech industry need a diverse set of experiences—entrepreneurial, managerial, and industry (technological domain)-specific—to craft a venture strategy. However, the conditions in which these experiences lead to an external investment remain unclear. We address this issue by arguing that these types of experience have different effects on the efforts of Founder CEOs and Non-Founder CEOs to influence external investment. We tested this theoretical argument using a sample of 60 new young high-technology ventures, and the results point to a positive association between founding teams’ prior managerial and industry (technological domain)-specific experience and the obtainment of external investment. The relationship between Founder CEO and external investment was negative. The interactive influence of a team’s prior experience and the CEO’s role on external investment demonstrates the former’s crucial effect on venture growth, particularly regarding new ventures managed by Founder CEOs and teams with prior managerial experience. Keywords Founding teams · Founder CEO · Non-founder CEO · External investment
1 Introduction Organizations need positive cash flow to survive and develop. This is especially critical in the case of new ventures that must finance all their different developmental stages, often through several external investment events (Kotha and George 2012; Tzabbar and Margolis * Abraham Carmeli [email protected] Tali Hadasa Blank [email protected] 1
Management of Service Organizations, Hadassah Academic College, 9101001 Jerusalem, Israel
2
Coller School of Management, Tel Aviv University, Ramat‑Aviv, 69978 Tel Aviv, Israel
13
Vol.:(0123456789)
T. H. Blank, A. Carmeli
2017; Wasserman 2003). In their early stage, new ventures not only have limited resources (Evans and Jovanovic 1989; Gubitta et al. 2016; Stevenson and Jarillo 2007), but are more likely to experience the ‘liability of newness,’ which generates a higher risk of failure for young firms (Stinchcombe and March 1965). Founders’ past experience (such as past interactions with investors and financial institutions) can help obtain financial resources that are needed to build solid foundations (e.g., human capital, technology, social capital, intellectual property) for a viable new venture. However, a person’s specific experience may be of even greater importance to successful new endeavors (Ratzinger et al. 2018), particularly when these involve high cognitive demands (McDaniel et al. 1988
Data Loading...
