Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth

Francesco D’Acunto, Geoffrey Tate and Liu Yang

Working Papers from U.S. Census Bureau, Center for Economic Studies

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 (search for similar items in EconPapers)
JEL-codes: J24 L25 L26 M51 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2020-12
New Economics Papers: this item is included in nep-ent, nep-ino, nep-lma, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:20-45

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