An Examination of the Effects of New Venture Team Diversity on New Venture Growth

Abstract

The composition of new venture teams as a component of success in new venture companies has received increasing attention in academia and practice. The purpose of this study is to explore the effects of diversity in terms of demographics and congenital learning on new venture growth, considering prior shared experience and international experience as moderators. Integrating upper echelons theory, new ventures, and social categorization and information/decision-making perspectives provided logical grounds to develop the hypotheses on the relationships between new venture team diversity and new venture growth. The sample consisted of 1,729 individuals from 182 new venture firms in the IT field in the San Francisco Bay Area. Hierarchical regression analysis was employed to test the hypotheses including the moderation effects. The findings indicated that age diversity was negatively related to firm growth, and place of origin diversity was positively related to firm growth. In terms of moderation, prior shared experience among founding team members and non-foreign-born members’ international experience positively moderated the relationships between the place of origin and firm growth. However, there was no moderation effect on the relationships between age and education diversity and firm growth. The findings of this study contribute to team diversity literature by empirically demonstrating the different effects of diversity on new venture teams. Further, the significant interaction between place of origin and the moderators implies that a high diversity level in terms of place of origin benefits firm growth when founding team members worked together before joining the current new venture and when non-foreign-born members had international experience.