Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth

69 Pages Posted: 19 Feb 2021

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Geoffrey A. Tate

University of Maryland - Robert H. Smith School of Business; National Bureau of Economic Research (NBER)

Liu Yang

University of Maryland, Robert H. Smith School of Business

Date Written: November 20, 2020

Abstract

We use employer-employee linked data to track the employment histories of team members prior to startup formation for a full cohort of new firms in the U.S. Using pre-startup industry experience to measure skillsets, we find that startups that have founding teams with more diverse collective skillsets grow faster than peer firms in the same industries and local economies. A one standard deviation increase in teams’ skill diversity is associated with an increase in five-year employment (sales) growth of 16% (10%) from the mean. The effects are stronger among startups in innovative industries and among startups facing greater ex-ante uncertainty. Moreover, the results are robust to a variety of approaches to address the endogeneity of team composition. Overall, our results suggest that teams with more diverse collective skillsets adapt their strategies more successfully in the uncertain environments faced by (innovative) startup firms.

Keywords: Economic Growth, Startups, Teams, Diversity, Innovation, Personnel Economics

JEL Classification: L25, L26, J24, M51

Suggested Citation

D'Acunto, Francesco and Tate, Geoffrey A. and Yang, Liu A., Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth (November 20, 2020). Available at SSRN: https://ssrn.com/abstract=3750982 or http://dx.doi.org/10.2139/ssrn.3750982

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Geoffrey A. Tate

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liu A. Yang (Contact Author)

University of Maryland, Robert H. Smith School of Business ( email )

4420 Van Munching Hall
Robert.H.Smith School of Business
College Park, MD 20742
United States
3014058794 (Phone)

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