IDEAS home Printed from https://ideas.repec.org/a/inm/ororsc/v31y2020i6p1336-1358.html
   My bibliography  Save this article

The Paradox of Resource Provision in Entrepreneurial Teams: Between Self-Interest and the Collective Enterprise

Author

Listed:
  • Tiantian Yang

    (Department of Sociology, Duke University, Durham, North Carolina 27708)

  • Jiayi Bao

    (Department of Business Economics and Public Policy, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Howard Aldrich

    (Department of Sociology, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599)

Abstract

Viewing entrepreneurship as a form of collective action, this paper investigates the tension between an entrepreneurial team’s reliance on collective efforts for achieving success and individual members’ tendencies to withhold their personal resources. We argue that the precarious nature of the early founding stage and the difficulty of redeploying some resources for other uses amplify the risk of early-stage resource contributions and may lead to team members withholding resources or even free riding. Two conditions may help overcome such collective action problems: adopting a formal contract to specify rewards and sanctions and encouraging reciprocal exchange among team members through the lead entrepreneur’s voluntary contributions. Analyzing a nationally representative multiwave panel study of entrepreneurial teams in the United States, we show that early-stage team members are reluctant to provide resources tailored to the business, even though such resources are critical to venture survival. We find that presigned formal contracts and founding entrepreneurs’ initial contributions make members’ contributions of such resources much more likely. Lead entrepreneurs’ voluntary contributions to their businesses, signified by their provision of resources that impose high risks on themselves but increase the viability of the business, help mitigate collective action problems within entrepreneurial teams.

Suggested Citation

  • Tiantian Yang & Jiayi Bao & Howard Aldrich, 2020. "The Paradox of Resource Provision in Entrepreneurial Teams: Between Self-Interest and the Collective Enterprise," Organization Science, INFORMS, vol. 31(6), pages 1336-1358, November.
    • Handle: RePEc:inm:ororsc:v:31:y:2020:i:6:p:1336-1358
    DOI: 10.1287/orsc.2019.1354
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/orsc.2019.1354
    Download Restriction: no
    File URL: https://libkey.io/10.1287/orsc.2019.1354?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kirsten Foss & Nicolai J. Foss & Peter G. Klein & Sandra K. Klein, 2007. "The Entrepreneurial Organization of Heterogeneous Capital," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1165-1186, November.
    2. Paul Davidson Reynolds, 2007. "Entrepreneurship in The United States," International Studies in Entrepreneurship, Springer, number 978-0-387-45671-3, November.
    3. Duncan Thomas, 1990. "Intra-Household Resource Allocation: An Inferential Approach," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 635-664.
    4. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    5. Gustavo J. Bobonis, 2009. "Is the Allocation of Resources within the Household Efficient? New Evidence from a Randomized Experiment," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 453-503, June.
    6. Kim, Phillip H. & Longest, Kyle C., 2014. "You can't leave your work behind: Employment experience and founding collaborations," Journal of Business Venturing, Elsevier, vol. 29(6), pages 785-806.
    7. Delmar, Frederic & Shane, Scott, 2004. "Legitimating first: organizing activities and the survival of new ventures," Journal of Business Venturing, Elsevier, vol. 19(3), pages 385-410, May.
    8. Christine M. Beckman & M. Diane Burton, 2008. "Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO," Organization Science, INFORMS, vol. 19(1), pages 3-24, February.
    9. Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
    10. Thomas Hellmann & Veikko Thiele, 2015. "Contracting among Founders," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(3), pages 629-661.
    11. M. Diane Burton & Phillip C. Anderson & Howard E. Aldrich, 2009. "Owner Founders, Nonowner Founders and Helpers," International Studies in Entrepreneurship, in: Richard T. Curtin & Paul D. Reynolds (ed.), New Firm Creation in the United States, chapter 0, pages 115-133, Springer.
    12. Dawn DeTienne & Melissa Cardon, 2012. "Impact of founder experience on exit intentions," Small Business Economics, Springer, vol. 38(4), pages 351-374, May.
    13. Caroline Flammer & Aleksandra Kacperczyk, 2016. "The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment," Management Science, INFORMS, vol. 62(7), pages 1982-2001, July.
    14. Beckman, Christine M. & Burton, M. Diane & O'Reilly, Charles, 2007. "Early teams: The impact of team demography on VC financing and going public," Journal of Business Venturing, Elsevier, vol. 22(2), pages 147-173, March.
    15. Martin Ruef, 2010. "The Entrepreneurial Group: Social Identities, Relations, and Collective Action," Economics Books, Princeton University Press, edition 1, number 9214.
    16. Oliver E. Williamson & Scott E Masten (ed.), . "The Economics of Transaction Costs," Books, Edward Elgar Publishing, number 1652.
    17. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    18. William P. Rogerson, 1992. "Contractual Solutions to the Hold-Up Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 777-793.
    19. Yang, Tiantian & Aldrich, Howard E., 2012. "Out of sight but not out of mind: Why failure to account for left truncation biases research on failure rates," Journal of Business Venturing, Elsevier, vol. 27(4), pages 477-492.
    20. Thomas Hellmann, 2007. "Entrepreneurs and the Process of Obtaining Resources," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 81-109, March.
    21. Howard Aldrich & Tiantian Yang, 2014. "How do entrepreneurs know what to do? learning and organizing in new ventures," Journal of Evolutionary Economics, Springer, vol. 24(1), pages 59-82, January.
    22. Noam Wasserman, 2017. "The throne vs. the kingdom: Founder control and value creation in startups," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 255-277, February.
    23. repec:bla:jfinan:v:59:y:2004:i:4:p:1805-1844 is not listed on IDEAS
    24. T. Paul Schultz, 1990. "Testing the Neoclassical Model of Family Labor Supply and Fertility," Journal of Human Resources, University of Wisconsin Press, vol. 25(4), pages 599-634.
    25. Sharon Belenzon & Aaron K. Chatterji & Brendan Daley, 2017. "Eponymous Entrepreneurs," American Economic Review, American Economic Association, vol. 107(6), pages 1638-1655, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiayi Bao, 2022. "Social safety nets and new venture performance: The role of employee access to paid family leave benefits," Strategic Management Journal, Wiley Blackwell, vol. 43(12), pages 2545-2576, December.
    2. Fultz, Andrew E.F. & Hmieleski, Keith M., 2021. "The art of discovering and exploiting unexpected opportunities: The roles of organizational improvisation and serendipity in new venture performance," Journal of Business Venturing, Elsevier, vol. 36(4).
    3. Pidduck, Robert J. & Clark, Daniel R. & Zhang, Yejun (John), 2024. "Cultivating entrepreneurial human capital in multinational corporations: An intercultural paradox mindset lens," Journal of World Business, Elsevier, vol. 59(5).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Hellmann & Noam Wasserman, 2017. "The First Deal: The Division of Founder Equity in New Ventures," Management Science, INFORMS, vol. 63(8), pages 2647-2666, August.
    2. Patrick Gregori & Zulaicha Parastuty, 2021. "Investigating the process of entrepreneurial team member exits: a systematic review and future research directions," Review of Managerial Science, Springer, vol. 15(4), pages 847-878, May.
    3. Yang, Tiantian & Aldrich, Howard E., 2012. "Out of sight but not out of mind: Why failure to account for left truncation biases research on failure rates," Journal of Business Venturing, Elsevier, vol. 27(4), pages 477-492.
    4. Browder, Russell E. & Aldrich, Howard E. & Bradley, Steven W., 2019. "The emergence of the maker movement: Implications for entrepreneurship research," Journal of Business Venturing, Elsevier, vol. 34(3), pages 459-476.
    5. Zabara, Tatiana, 2019. "Evolution of entrepreneurial teams in technology-based new ventures," Other publications TiSEM cc09d065-3811-47b6-9c93-8, Tilburg University, School of Economics and Management.
    6. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    7. LaFave, Daniel & Thomas, Duncan, 2017. "Extended families and child well-being," Journal of Development Economics, Elsevier, vol. 126(C), pages 52-65.
    8. Tali Hadasa Blank & Abraham Carmeli, 2021. "Does founding team composition influence external investment? The role of founding team prior experience and founder CEO," The Journal of Technology Transfer, Springer, vol. 46(6), pages 1869-1888, December.
    9. Gutierrez, Federico H., 2018. "A Sharing Model of the Household: Explaining the Deaton-Paxson Paradox and Computing Household Indifference Scales," GLO Discussion Paper Series 166, Global Labor Organization (GLO).
    10. Christina Guenther & Simon Oertel & Peter Walgenbach, 2016. "It's all about Timing: Age–Dependent Consequences of Founder Exits and New Member Additions," Entrepreneurship Theory and Practice, , vol. 40(4), pages 843-865, July.
    11. Zellmer-Bruhn, Mary E. & Forbes, Daniel P. & Sapienza, Harry J. & Borchert, Patricia S., 2021. "Lab, Gig or Enterprise? How scientist-inventors form nascent startup teams," Journal of Business Venturing, Elsevier, vol. 36(1).
    12. Parys, Juliane & Schwerhoff, Gregor, 2010. "Efficient Intra-Household Allocation of Parental Leave," IZA Discussion Papers 5113, Institute of Labor Economics (IZA).
    13. Doss, Cheryl, 2013. "Intrahousehold bargaining and resource allocation in developing countries," Policy Research Working Paper Series 6337, The World Bank.
    14. Marcos A. Rangel & Duncan Thomas, 2019. "Decision-Making in Complex Households," Working Papers 2019-070, Human Capital and Economic Opportunity Working Group.
    15. Kim, Phillip H. & Longest, Kyle C. & Lippmann, Stephen, 2015. "The tortoise versus the hare: Progress and business viability differences between conventional and leisure-based founders," Journal of Business Venturing, Elsevier, vol. 30(2), pages 185-204.
    16. Massimo G. Colombo & Cristina Rossi-Lamastra, 2013. "The organizational design of high- tech start- ups: state of the art and directions for future research," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 21, Edward Elgar Publishing.
    17. Gustavo J. Bobonis, 2011. "The Impact of Conditional Cash Transfers on Marriage and Divorce," Economic Development and Cultural Change, University of Chicago Press, vol. 59(2), pages 281-312.
    18. Exequiel Hernandez & Elena Kulchina, 2020. "Immigrants and Foreign Firm Performance," Organization Science, INFORMS, vol. 31(4), pages 797-820, July.
    19. Kwapisz Agnieszka, 2020. "Minimum Wages and Nascent Entrepreneurship in the US," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-15, January.
    20. Yang Yang, 2023. "Hukou Identity and Economic Behaviours: A Social Identity Perspective," Erudite Ph.D Dissertations, Erudite, number ph23-02 edited by Catherine Bros & Julie Lochard.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ororsc:v:31:y:2020:i:6:p:1336-1358. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.