Unequal implies success? How initial ownership split impacts team entry and new venture performance

Elisabeth Mueller and Maria Hennicke

European Management Journal, 2024, vol. 42, issue 3, 305-315

Abstract: When launching a new venture, the new venture team (NVT) determines the ownership split, a decision which has implications for the venture's performance. We develop a novel theoretical framework by extending the relational-models theory to the type of ownership split chosen and explaining the choice of an equal or unequal split with the preferred model of social interaction. The models differ in terms of contribution organization and valuation, as well as the primary motivations of NVT members. We hypothesize that NVTs with unequal splits perform better and are more open to NVT entry. Furthermore, NVT entry is hypothesized to act as a partial mediator in the ownership split–performance relationship. We find support for our hypotheses using mediation analysis on a large sample of 24,194 German start-ups. Our research contributes to a better understanding of the performance implications of NVT's internal organization. Our findings, however, do not imply that all NVTs should choose an unequal split. Importantly, our research demonstrates that, depending on owners' preferences, both equal and unequal splits are distinct and viable models for organizing NVTs, even though performance differences should be taken into consideration.

Keywords: Ownership split; Relational models theory; NVT entry; New venture performance (search for similar items in EconPapers)
JEL-codes: L26 M13 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.emj.2022.12.012

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