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Top management teams and the performance of entrepreneurial firms

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  • Kathleen Eisenhardt

Abstract

This article examines why some entrepreneurial firms succeed while others do not. The focal explanation is top management teams, including several studies that address when and how top management teams are likely to influence entrepreneurial firm performance. There are several insights. First, large and diverse teams with a history of working together are more likely to succeed. This effect is particularly large when they launch in growth markets. Second, teams are effective in making strategic decisions when they are fast, highly conflictual, and still get along. Third, they are also effective when they rely on “simple rules” heuristics to perform significant activities like new product development and internationalization that nonetheless happens often. A further insight is that these “simple rules” can become the strategy of their firms. Fourth, more effective teams continuously organize the structures of their firms at the “edge of chaos”. Overall, top management teams emerge as central to the success (or lack thereof) of entrepreneurial firms. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Kathleen Eisenhardt, 2013. "Top management teams and the performance of entrepreneurial firms," Small Business Economics, Springer, vol. 40(4), pages 805-816, May.
  • Handle: RePEc:kap:sbusec:v:40:y:2013:i:4:p:805-816
    DOI: 10.1007/s11187-013-9473-0
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    References listed on IDEAS

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    1. 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.
    2. Joel A. C. Baum & Tony Calabrese & Brian S. Silverman, 2000. "Don't go it alone: alliance network composition and startups' performance in Canadian biotechnology," Strategic Management Journal, Wiley Blackwell, vol. 21(3), pages 267-294, March.
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    4. Kathleen M. Eisenhardt & Claudia Bird Schoonhoven, 1996. "Resource-based View of Strategic Alliance Formation: Strategic and Social Effects in Entrepreneurial Firms," Organization Science, INFORMS, vol. 7(2), pages 136-150, April.
    5. Noam Wasserman, 2003. "Founder-CEO Succession and the Paradox of Entrepreneurial Success," Organization Science, INFORMS, vol. 14(2), pages 149-172, April.
    6. L. J. Bourgeois, III & Kathleen M. Eisenhardt, 1988. "Strategic Decision Processes in High Velocity Environments: Four Cases in the Microcomputer Industry," Management Science, INFORMS, vol. 34(7), pages 816-835, July.
    7. Ranjay Gulati & Monica C. Higgins, 2003. "Which ties matter when? the contingent effects of interorganizational partnerships on IPO success," Strategic Management Journal, Wiley Blackwell, vol. 24(2), pages 127-144, February.
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    Cited by:

    1. Davide Sala & Erdal Yalcin, 2015. "Export Experience of Managers and the Internationalisation of Firms," The World Economy, Wiley Blackwell, vol. 38(7), pages 1064-1089, July.
    2. Anne Tryba & Denise Fletcher, 2020. "How shared pre-start-up moments of transition and cognitions contextualize effectual and causal decisions in entrepreneurial teams," Small Business Economics, Springer, vol. 54(3), pages 665-688, March.
    3. Marijana Srećković, 2018. "The performance effect of network and managerial capabilities of entrepreneurial firms," Small Business Economics, Springer, vol. 50(4), pages 807-824, April.
    4. Protogerou, Aimilia & Caloghirou, Yannis & Vonortas, Nicholas S., 2017. "Determinants of young firms’ innovative performance: Empirical evidence from Europe," Research Policy, Elsevier, vol. 46(7), pages 1312-1326.
    5. Gregori, Patrick & Ukobitz, Desiree V. & Parastuty, Zulaicha, 2018. "A Conceptual Framework on Entrepreneurial Team Member Exits: A Starting Point for Further Research," 6th International OFEL Conference on Governance, Management and Entrepreneurship. New Business Models and Institutional Entrepreneurs: Leading Disruptive Change (Dubrovnik, 2018), in: 6th International OFEL Conference on Governance, Management and Entrepreneurship. New Business Models and Institutional Entrepreneurs: Leading Disrupt, pages 453-474, Governance Research and Development Centre (CIRU), Zagreb.
    6. Bo Carlsson & Pontus Braunerhjelm & Maureen McKelvey & Christer Olofsson & Lars Persson & Håkan Ylinenpää, 2013. "The evolving domain of entrepreneurship research," Small Business Economics, Springer, vol. 41(4), pages 913-930, December.
    7. Hadjielias, Elias & (Lola) Dada, Olufunmilola & Discua Cruz, Allan & Zekas, Stavros & Christofi, Michael & Sakka, Georgia, 2021. "How do digital innovation teams function? Understanding the team cognition-process nexus within the context of digital transformation," Journal of Business Research, Elsevier, vol. 122(C), pages 373-386.
    8. Kip Kiefer & Mark Heileman & Timothy L. Pett, 2022. "Does gender still matter? An examination of small business performance," Small Business Economics, Springer, vol. 58(1), pages 141-167, January.
    9. Mahamadou Biga-Diambeidou & Maria Giuseppina Bruna & Rey Dang & L’Hocine Houanti, 2021. "Does gender diversity among new venture team matter for R&D intensity in technology-based new ventures? Evidence from a field experiment," Small Business Economics, Springer, vol. 56(3), pages 1205-1220, February.
    10. Kassotaki, Olga, 2019. "Explaining ambidextrous leadership in the aerospace and defense organizations," European Management Journal, Elsevier, vol. 37(5), pages 552-563.
    11. Elisa Ughetto, 2016. "Growth of born globals: the role of the entrepreneur’s personal factors and venture capital," International Entrepreneurship and Management Journal, Springer, vol. 12(3), pages 839-857, September.
    12. Bernadetta A. Ginting-Szczesny & Ewald Kibler & Melissa S. Cardon & Teemu Kautonen & Henri Hakala, 2024. "The role of passion diversity, compassion, and self-compassion for team entrepreneurial passion," Small Business Economics, Springer, vol. 62(3), pages 987-1007, March.
    13. Daniel A. Lerner & Richard A. Hunt & Ingrid Verheul, 2017. "Dueling Banjos: Harmony and Discord between ADHD and Entrepreneurship," Working Papers 2017-07, Colorado School of Mines, Division of Economics and Business.
    14. 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.
    15. Ekaterina Bjørnåli & Sarosh Asad & Siri Terjesen, 2024. "Determinants of intra-board behavioral integration in high-tech start-ups," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(1), pages 215-236, March.
    16. Allal-Chérif, Oihab & Guijarro-Garcia, María & Ulrich, Klaus, 2022. "Fostering sustainable growth in aeronautics: Open social innovation, multifunctional team management, and collaborative governance," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    17. Matthew L. Cole & John D. Cox & Jacqueline M. Stavros, 2018. "SOAR as a Mediator of the Relationship Between Emotional Intelligence and Collaboration Among Professionals Working in Teams: Implications for Entrepreneurial Teams," SAGE Open, , vol. 8(2), pages 21582440187, May.
    18. Cristina Quintana-García & Carlos A. Benavides-Velasco & Vanesa F. Guzmán-Parra, 2016. "Science-based Firms Going Public: The Role of Patent Indicators and Top Management Teams," Industry and Innovation, Taylor & Francis Journals, vol. 23(3), pages 243-259, April.

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    More about this item

    Keywords

    Entrepreneurship; Top management teams; Firm performance; Strategic decision making; Heuristics; Organizational structure; Organizational processes; Edge of chaos; Strategy as simple rules; D22; L10; L25; L26;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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