Founding Teams and Startup Performance

58 Pages Posted: 1 Feb 2021 Last revised: 18 Nov 2021

See all articles by Joonkyu Choi

Joonkyu Choi

Board of Governors of the Federal Reserve System

Nathan Goldschlag

Center for Economic Studies, U.S. Census Bureau

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

J. Daniel Kim

The Wharton School

Multiple version iconThere are 2 versions of this paper

Date Written: January 2021

Abstract

We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams as both the founders and early joiners. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. Consistent with our organizational capital hypothesis, effects are stronger for firms with small founding teams and those operating in business-to-business (B2B) oriented sectors. Moreover, while we find that the loss of a founder has an especially large adverse effect, the loss of an early joiner nonetheless exhibits a significant negative effect, lending support to our inclusive definition of founding teams.

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Suggested Citation

Choi, Joonkyu and Goldschlag, Nathan and Haltiwanger, John C. and Kim, J. Daniel, Founding Teams and Startup Performance (January 2021). NBER Working Paper No. w28417, Available at SSRN: https://ssrn.com/abstract=3776985 or http://dx.doi.org/10.2139/ssrn.3776985

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Nathan Goldschlag

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