Team Heterogeneity in Startups and its Development over Time

Management scholars predominantly advocate that startup teams should consist of members with different rather than similar backgrounds. Such heterogeneous team members are supposed to bring in a greater variety of perspectives and more creativity which in turn leads to better team performance. There are also, however, also downsides connected with workforce heterogeneity like affective conflict or coordination cost which may make people \homophile", i.e. inclined to bound with others with similar characteristics

Existing empirical studies have, however, come to quite divergent findings regarding the relationship between team heterogeneity and firm performance. These studies are often based on very small and highly selective samples

We investigate workforce heterogeneity of startups with respect to education, age and wages using data on the population of Danish firms founded in 1998 which we follow until 2001. This allows us to also analyze changes in workforce composition over time, a topic hitherto unexplored in the literature due to binding data constraints

As a methodological contribution, we construct a simulated benchmark with randomly matched teams to which we compare the observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our benchmark situation. We also document that workforces become more heterogeneous over time - startups add workers with skills different from the workforce at startup. The initial supposedly \poor" mix of workforce characteristics is hence adjusted as the startup matures. This increase in workforce heterogeneity is, however, smaller than in a situation in which startups add new employees randomly. Our results hold both for knowledge-based non{knowledge-based startups although knowledge{based startups tend to be more heterogeneous in characteristics than non-knowledge-based startups.

Kaiser, Ulrich and Bettina Müller (2013), Team Heterogeneity in Startups and its Development over Time, ZEW Discussion Paper No. 13-058, Mannheim.