The devil you know? The potential downside of strong and weak ties for entrepreneurial team formation

Zolin, Roxanne, Kautonen, Teemu, & Kuckertz, Andreas (2008) The devil you know? The potential downside of strong and weak ties for entrepreneurial team formation. In Gillin, Murray (Ed.) 5th AGSE International Entrepreneurship Research Exchange, 5 – 8 February 2008, Melbourne, Australia.

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Principal Topic -- Since the late 1980s researchers have been theorizing about entrepreneurial teams (Kamm, et al., 1990), exploring their existence (Ensley, et al., 1999), discussing their formation and evolution (Virany & Tushman, 1986; Clarysse & Moray, 2004; Ucbasaran, et al., 2005; Forbes, et al., 2006; Vanaelst, et al., 2006; Vanaelst, et al., 2006), and evaluating their importance (Hall & Hofer, 1993). ''An entrepreneurial team is defined as 2 or more individuals who jointly establish a business in which they have an equity interest'' (Kamm, et al., 1990, p. 7). Research has found that entrepreneurial team cognition influences the venture's performance (West, 2007), team process variables influence team effectiveness (Chowdhury, 2005); team characteristics (Dubini, 1989) and social interaction (Lechler, 2001) are crucial to the venture's success and the team's initial resources affect the firm's survival (Aspelund, et al., 2004). Previous research suggests that strong and weak network ties (Granovetter, 1973) among entrepreneurial team members have different fortes and could be critical to the success of a new business. Actors relying on weak ties in large entrepreneurial teams were more likely to be creative (Ruef, 2002). Friendship, a strong tie, has been proposed to exert positive influences on new venture creation (Frances & Sandberg, 2000), although negative influences were allowed for, but not explicated. Strong ties may force the growing organization to cope with team members in key roles that are outside their ability, while weak ties to could make changing the entrepreneurial team easier. This research asks how the strength of network ties affects resource flexibility and entrepreneurial team performance -- Methodology/Key Propositions -- In this paper we develop and empirically test a theoretical model, which shows how strength of ties affects resource flexibility and entrepreneurial team performance. Our model will be tested against a representative sample of venture-capital-backed firms from three German speaking countries, i.e. Germany, Austria and Switzerland. Data will be collected online and analyzed by utilizing adequate structural-equation-modelling techniques such as PLS (Chin 1998) or LISREL, respectively. The central propositions in the model are as follows: Entrepreneurial team members often perform functions, such as technology development, marketing, human resources, or finance. The major dimension of Smith's framework for measuring work performance is closeness to organizational goals, which has three levels: behaviors, results and organizational effectiveness (Landy and Farr, 1983). Behaviors refer to observation of work behavior, such as the performance of work processes. In the knowledge work performed by entrepreneurial teams, some important behaviors include flexibility, information sharing, problem solving and creativity. Results refer to the output of work. Three major work outputs are time, cost and quality. When considering entrepreneurial team performance we propose that process performance (behaviors) will influence the team's output performance (results) (Proposition 1). We now describe how team process and output performance are influenced by resource flexibility. ''Resource flexibility refers to the ability to dynamically reallocate one or more renewable resources in a production process.'' (Daniels, et al., 2004, 658). From a human resource perspective, a resource can be defined as ''any mechanism that is capable of playing the role of a supplier, a worker, an automated piece of equipment, or anything else that can execute a task'' (Vairaktarakis, 2003). Resource flexibility can reduce project duration (Vairaktarakis, 2003), increase work performance (Jensen, 2000) and firm performance (Senjem, 2001; Bahattacharya, 2000). Resource flexibility can be achieved through numerical or functional flexibility (van Ham, Paauwe & Williams, 1987). Numeric flexibility is the ability to vary the size of the workforce, for example contingent labor. Functional flexibility is the ability to perform a wider range of tasks, for example crosstraining (Daniels, et al., 2004). In an entrepreneurial team, resource flexibility is the ability to modify work agreements (functional) or exit the relationship (numeric) (Young-Ybarra & Wiersema, 1999). A team member recruited for technology development, who can switch to selling increases team output performance (Proposition 2). But the ability of the firm to exit relationships with entrepreneurial team members could reduce trust, resulting in a negative relationship with team process performance (Proposition 3). Next we explain how resource modifiability and exit are differently affected by strong and weak ties. Granovetter (1973, p. 1361) defines the strength of a network tie as ''a (probably linear) combination of the amount of time, the emotional intensity, the intimacy (mutual confiding) and the reciprocal services which characterize the tie''. Strong ties are characterized as family or friends, people who are very well known, while weak ties refer to acquaintances or ''friends of friends''. The exclusive or predominant use of strong ties may generate social obligations that increase resource modifiability (Proposition 4), but are difficult to exit if the friend or family member is not able to keep up with the demands of the growing business (Proposition 5) -- Results and Implications -- Researchers have proposed that social networks could be a competitive advantage, but how can an entrepreneurial team determine the quality of their network when we don't know the advantages or disadvantages of strong versus weak ties? Strong ties could increase resource modifiability, improving process performance, but reduce exit, reducing output performance. In contrast, weak ties could increase exit, making it easier to recruit the best team and improve team output, at a cost to team process. Understanding how strong and weak ties affect team process and output performance will help new business startups create superior entrepreneurial teams.

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ID Code: 17622
Item Type: Conference Paper
Refereed: Yes
Keywords: Entrepreneurial Teams, Strong Ties, Resource Flexibility
ISBN: 9780980332834
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300) > Entrepreneurship (150304)
Divisions: Current > Research Centres > Australian Centre for Entrepreneurship
Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Management
Copyright Owner: Copyright 2008 [please consult the authors]
Deposited On: 10 Feb 2009 04:23
Last Modified: 29 Feb 2012 13:45

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