Team formation processes in new ventures

With his seminal article “Who is the entrepreneur is asking the wrong question”, Gartner (1988) initiated a new paradigm in entrepreneurship research. Instead of focusing on the characteristics of entrepreneurs, scholars began to research the entrepreneurial process. While it is now widely accepted that entrepreneurship is a process that unfolds over time rather than a singular act, different conceptualizations of the process have emerged (Moroz and Hindle 2012). We here follow the conceptualizations of entrepreneurship as the process of venture creation (VCP), a conceptualization now considered to be central to entrepreneurship research (Davidsson and Gordon 2012).

Among those who understand entrepreneurship as the creation of ventures, a variety of ways to define and operationalize VCPs exist and our knowledge about it remains limited (Samuelsson and Davidsson 2009). The literature on VCPs and venture growth has produced a variety of perspectives on how ventures are created, of which the two most prominent ones are stage-based models and activity-based models (Moroz and Hindle 2012). Stage-based models postulate that all ventures, just like organisms, go through the same, predetermined stages in their development (Levie and Lichtenstein 2010). Hence, the underlying concept of VCPs is a passive one that assumes a “natural,” almost automatic progression through the different stages, thereby putting little emphasis on the activities and choices of the entrepreneur. In contrast, activity-based models conceive a VCP as the number and sequence of singular gestation activities occurring throughout the VCP (Carter et al. 1996). The result is a rather active VCP concept explicitly focusing on the actions of the entrepreneur. In fact, this approach defines the VCP as the accumulation of singular activities that the entrepreneur chooses to undertake from an eclectic list of gestation activities. Despite these substantial differences, neither perspective has yet produced a coherent, widely accepted conceptualization of the VCP (Levie and Lichtenstein 2010; Davidsson and Gordon 2012).

The most recent literature on venture creation argues that this conceptual failure has methodological origins: existing studies do not analyze the VCP as the unit of analysis but rather treat entrepreneurship as a linear succession of distinct stages or a number of singular gestation activities (Garnsey et al. 2006; McMullen and Dimov 2013; Hjorth et al. 2015). This often leads to the use of methods not optimal for studying processes (Van de Ven and Engleman 2004; Gordon 2012; Langley et al. 2013): More concretely, Aldrich (2001) distinguishes between outcome-driven (or variance) explanations and event-driven (or process) explanations. While variance-driven studies are suitable to explain change through deterministic causation, event-driven studies consider every action and how they form one process unit (Poole et al. 2000). Because the vast majority of publications have employed variance explanations, they are able to answer questions about antecedents and outcomes of the entrepreneurial process, but little progress has been made to explain how said process unfolds (Van de Ven and Engleman 2004; Ruef 2005).

Furthermore, it has been argued that important heterogeneities between different ventures and venture creation contexts make it difficult to uncover patterns in VCPs. In order to be able to produce meaningful descriptions of VCPs, different characteristics of ventures, as well as the context of their creation, need to be taken into account and controlled for (Samuelsson and Davidsson 2009; Gartner and Shaver 2012).

Taken together, the different literature strands on VCPs thus provide inconclusive results about whether VCPs are “order or chaos.” Yet, this question has become ever more important in view of the increasing number of countries that implement policies to stimulate economic growth through entrepreneurship. While the differences in the level of entrepreneurial activity between countries are well documented, the lack of knowledge about VCPs means that we do not know whether the processes underpinning entrepreneurial activity also differ between countries. We need to understand if, and how, national institutions shape VCPs in order to decide whether one optimal blueprint for the stimulation of entrepreneurship exists, or whether entrepreneurship policies have to be adapted to VCPs shaped by national institutions.

In order to address this research gap, we focus on the most essential process within venture creation, namely the one of team formation (TFP). The process of team formation describes the assembly of a venture’s most crucial resource: human capital. A great number of studies have found that the human capital embodied by a venture’s founders is the most significant predictor for a venture’s survival and growth (Bates 1990; Cooper et al. 1994; Bosma et al. 2004; Delmar and Shane 2004; Colombo and Grilli 2005). Building on these insights, recent studies on team formation argue that employees contribute in similar fashion to a venture’s human capital and subsequently its survival (Weber and Zulehner 2010; Koch et al. 2013; Dahl et al. 2015; Coad et al. 2016). Consequently, we conceptualize the team formation process as the time commitments of founders, employees, and service providers at any time between inception of the venture and the point it reaches profitability or exits.

Accordingly, our research addresses the above gaps in the VCP literature by asking:

Do distinct types of team formation processes exist, how do they differ and which structural characteristics can explain these differences?

Our paper answers these questions by taking a new methodological and empirical approach: we apply optimal matching (OM) and clustering techniques to the novel data of the “Perfect Timing” dataset, reporting the venture creation processes of 344 start-up ventures on a monthly basis. Owing to OM analyses and clustering techniques, we are able to study entire VCPs as the unit of analysis and thus, to explore distinct team formation processes on the basis of the team formation activities undertaken, their timing, and duration.

In summary, these OM analyses demonstrate that team formation is “order” rather than chaos as distinct temporal patterns of team formation exist with regard to the time commitment of founders as well as the extent to which employees and service providers are hired. Importantly, we are able to explore a distinct number of approaches for each of these three team-formation dimensions. Furthermore, correlation and regression analyses illustrate that the approaches in one dimension are only weakly correlated to the approaches of the two other dimensions: We observe additivity effects between founder involvement and employee hiring, while the data indicates that substitution effects exist between the hiring of employees and service provider engagement. Finally, binary logistic regression analyses reveal that structural characteristics, in particular the venture’s institutional environment and innovativeness, influence which team formation approach is pursued.

To illustrate these findings, the paper proceeds as follows: In Section 2, we begin with a short review of the literatures on entrepreneurial processes in general and team formation in particular. In doing so, we highlight the opposing views of the stage-based and activity-based approaches. In Section 3, we present the data and methodology employed, while we present our results in Section 4. In Section 5, we discuss these findings and their limitations in the context of previous research and the methodology used. Importantly, we also reflect on the opportunities for future research based on OM techniques.

In the following section, we introduce the theoretical building blocks required to explore team formation processes in ventures. As illustrated in Fig. 1, we summarize in a first step the literatures discussing different types of team formation. Focusing on its three core dimensions—founder, employees, and service provider involvement—we formulate Proposition 1: that distinct types of team formation exist for each dimension. With that in mind, we review in a second step the literature that discusses possible interdependences between approaches (Proposition 2). In a last step, we review the literatures on possible influences of structural characteristics upon team formation, in particular labor-market regulation, nature of the venture’s good, and innovativeness (Propositions 3–5).

What do the different literature strands on team formation processes (TFPs) teach us about how these may evolve? Is team formation random or evolving along systematic trajectories? The stage-based literature was the first to address this question. Here, venture creation in general, as well as team formation in particular, are commonly depicted as a series of prescribed stages (Phelps et al. 2007; Levie and Lichtenstein 2010). With regard to team formation, many stage models describe a process of continuous growth which, in the beginning, is centered on the role of the founder(s). Kazanjian and Drazin (1990) and Kaulio (2003), for example, posit that, during the first stage of venture creation, the founder(s) work on a prototype or idea. Once the prototype has been created, more founders or core employees join the team in order to work on the products’ commercialization during the second stage. Once a commercially viable product has been created, the venture enters into the stage of growth, during which more employees and service providers join to the team. Hence, team formation is described as a linear process during which the team grows from one to many founders who increasingly hire employees as time goes by.

The gestation activity literature instead portrays team formation as non-linear processes which are characterized by a variety of activities such as organizing the founder team, switching between part- and full-time work, and hiring employees, all of which can occur at different moments (Reynolds and Miller 1992; Gatewood et al. 1995; Carter et al. 1996). While these studies establish that more than one team formation process exists, they only provide snapshots into the frequencies with which different team formation activities take place at different moments of the process.

To give some examples, Gartner et al. (2004) analyze the first start-up activity carried out by new ventures and find that only few ventures start with activities related to team formation, such as “organizing the start-up team” (6%), getting “devoted full-time” (2%), or “hiring employees” (< 1%). Another study investigates the sequence of individual start-up activities, distinguishing between successful, interrupted, and ongoing venture creation processes: In this study, Carter et al. (1996) illustrate that the majority of successful ventures organize the founder team in the second quarter after venture inception, while at least one founder switches to full-time work at the same time. In the following quarter, the first employee is hired. In contrast, founders who give up on venture creation mostly organize the founder team in the first month after inception, but wait for 1 year before switching to full-time work. By contrast, founders of unsuccessful ventures, characterized by ongoing venture creation processes, organize the founder team in the second quarter after venture inception but never switch to full-time work, nor hire any employees.

In summary, while some scattered evidence exists, systematic insights into how team formation evolves over time with regard to founder involvement, the hiring of employees, or other types of labor are still missing (Gordon 2012; Jaspers and Hak 2013). That said, it is interesting to note that the activity-based literature agrees with the stage-based literature in that team formation process are not random but follow distinct patterns. Yet, contrary to the stage-based literature, the activity-based literature holds that these patterns do mostly not follow a linear growth process and are context-dependent (Liao et al. 2005; Gartner and Shaver 2012).

Beyond the stage- and activity-based literatures, various research strands provide insights into individual aspects of team formation without explicitly positioning their findings within the overall team formation process. These aspects include the development of founder teams, the time commitment of founders including part-time entrepreneurs as well as their transition to full-time entrepreneurship, the hiring of employees, and the engaging of service providers.

Those few studies that analyze the development of founder teams illustrate that founder exit is more likely than founder entry throughout the TFP (Hellerstedt 2009). Furthermore, the initial number of founders seems to influence subsequent founder exit and entry. However, the exact effect remains unclear: while some authors argue that the likelihood of founders exiting or additional founders joining the team is higher for bigger teams (Chandler et al. 2005; Hellerstedt 2009), others observe the opposite effect (Ucbasaran et al. 2003). Yet researchers, investigating founder team development, largely concur in their observation that the number of founders overall remains stable throughout the TFP in most ventures (Hellerstedt 2009).

A further research strand, known as the literature on part-time or hybrid entrepreneurship, illustrates that not only the number of founders can vary throughout TFPs but also their time commitment. Wennberg et al. (2006) were one of the first to argue that besides the traditional dichotomy of being an employee or a full-time entrepreneur, the possibility of creating a venture in part-time exists. Several empirical studies show that a significant amount of founders actually choose to do so, whereby the exact amount of part-time founders (or hybrid entrepreneurs) varies strongly between countries. In Germany, for example, 64% of ventures created in 2013 were set-up by part-time founders (Metzger 2014). The opportunity to test one’s own abilities as a founder, while reducing the financial and labor-market risks related to full-time entrepreneurship, is mentioned among the most important motives for part-time entrepreneurship (Folta et al. 2010; Raffiee and Feng 2014).

More recent studies on hybrid entrepreneurship show that entrepreneurs do not necessarily remain part- or full-time entrepreneurs for the entire duration of the TFP, but increase or decrease their time commitments throughout the TFP (Folta et al. 2010; Block and Landgraf 2016). For example, Block and Landgraf (2016) find that 20% of full-time founders in their study of German founders initially started out as part-time founders, whereby it remains unknown when these switches from part-time to full-time entrepreneurship occurred.

Even though considered a key decision for young ventures, surprisingly little is known about the hiring of employees (Cardon and Stevens 2004). One problem is that most studies exploring the initial size of ventures ignore (very) small ventures which arguably make up the vast majority of ventures. Consequently, only scattered evidence exists about the extent and timing of employee hiring. The study by Melillo et al. (2013) on Swedish ventures in knowledge-intense industries (1994–2001) encompasses ventures of all sizes, including one-person ventures. It comes to the conclusion that 93% of ventures do not hire any employee during the first year of their existence. The remaining 7% of ventures involve one (5.3%), two (.89%), three (.4%), or four or more employees (.54%) during the same time span. Following Swedish ventures created in 1998 over the first 2 years of their existence, Delmar and Shane (2003) report the following development of average employee number: At their inception, ventures hire an average employee capacity of .17 FTE, which increases over the following 6 months to .51 FTE. In month 12, the average employee capacity hired further increases slowly to .73 FTE, before jumping up to 3.2 FTE in month 18. Interestingly, the average employee number hired then drops to 1.62 FTE in month 24, i.e., the last observation point. Finally, the findings of Cooper et al. (1989) illustrate that US ventures which in the first year hire three employees or less grow more strongly during the remaining TFP, both in relative and absolute terms, than ventures that start out with more employees.

The existing evidence regarding the involvement of external service providers in team formation is even more scattered than for the hiring of employees, whereby scholars agree about the importance of service providers as an external source of labor: Cassar and Ittner (2009) demonstrate that a large number of new ventures in the US engage, or plan to engage, accountants (64%) and lawyers (46%) in their quest for profitability. At what point in the TFP the initial engaging of accountants occurs seems to strongly coincide with events like initial sale or opening of the ventures bank account. Furthermore, Bennett et al. (1999) show that small- and medium-sized companies in the UK tend to make use of multiple external service providers and that the use of external service providers is positively related to the number of employees: the higher the number of employees, the more likely that a service providers is engage. Cooper et al. (1989) come to the same conclusion in the US context.

While the existing studies provide valuable insights into TFPs, indicating that team formation in ventures is neither chaos nor unidimensional order, it remains unclear what and how many distinct approaches to TFP exist, and what they look like. Based on the available evidence on TFPs, we expect that

If we are right in that team formation processes follow distinct pathways with regard to founder involvement, employees hiring, and the engagement of service providers, the question arises of how do these three channels relate to each other. Does the way in which founders contribute to venture creation influence the extent and timing of employee hiring and service provider engagement? And does the hiring of employees correlate with the engagement of service providers: For example, can we observe substitution or additive effects with regard to the involvement of internal labor (founders and employees) and external labor (service providers) throughout the TFP? Or are the approach to founder involvement, employee hiring, and service provider engagement unrelated to each other?

While specific research into the relationship between founder, employee, and service provider involvement during venture creation does not exist, different and often contradicting approaches to aggregate team formation have been described in the literature. On the one hand, studies describe additive effects in high-growth ventures where higher founder commitment co-occurs with extensive employee growth and service provider engagement (Cooper et al. 1989; Reynolds and White 1997). On the other hand, scholars observe substitution effects in ventures with growth aspirations between the hiring of employees and engaging service providers as ventures try to avoid high ancillary wage costs and employee protection (Román et al. 2011).

In line with these insights, we expect that

Should we be able to identify systematically different approaches to founder, employee, and service provider involvement during venture creation, the question arises how to explain which approach is chosen: under which conditions do founders engage in one rather than another way of setting up their venture? And under which conditions do they hire no, some, or many employees and service providers respectively? In other words, which influence does a venture’s context and its characteristics have on the approaches chosen toward team formation? A wide variety of VCP studies have pointed out that part of the struggle to establish coherent patterns in VCP stems from the negligence of differences in the context and characteristics of the studied ventures (Van de Ven and Engleman 2004; Ruef 2005; Gartner and Shaver 2012). Among the most prominent factors identified in the entrepreneurship literature are national institutions, a venture’s innovation strategy, and the type of product developed (Ruef 2005; Samuelsson and Davidsson 2009).

To begin with, the influence of national institutions on venture creation processes (in our case the influence of labor-market institutions on team formation processes) the “Varieties-of-Capitalism” (VoC) literature has long established that companies follow distinct human resource approaches as a reaction to different types of labor-market regulations (Estévez-Abe and Iversen 2001; Hall and Soskice 2001a; Herrmann and Peine 2011). Other than a recent study by Dilli et al. (2018), these studies focus on incumbent firms rather than start-up ventures, their reasoning however is compatible with various entrepreneurship studies on how the rigidity of national labor-market institutions may influence team formation in new ventures.

With regard to institutional influences on founder involvement, real-options theory assumes that an individual will choose entrepreneurship over dependent employment if the potential rewards of starting a venture outweigh the related risks (Wennberg et al. 2006). In line with the reasoning of the VoC literature, this implies that strong employment protection—in the form of strong unions, centralized wage bargaining, long notice periods, and limited reasons for dismissal—makes dependent employment more attractive vis-à-vis entrepreneurship (Wennekers et al. 2005). At the same time, strong labor-market regulations also makes the hiring of employees relatively more costly for entrepreneurs which, in turn, makes entrepreneurship less attractive (van Stel et al. 2007; Henrekson et al. 2010). Both effects imply that the level of certainty about a venture’s profitability has to be higher in rigid labor-markets than in liberal ones for prospective founders to give up their jobs in favor of committing themselves to venture creation (Román et al. 2013). One way of increasing certainty about one’s entrepreneurial abilities and the venture’s profitability, without giving up the benefits of dependent employment, is part-time entrepreneurship (Raffiee and Feng 2014). Hence, part-time entrepreneurship seems more likely in regulated than in flexible labor markets.

With regard to institutional influences on employee hiring, the VoC reasoning is compatible with the insights of several entrepreneurship studies: that rigid labor-market institutions reduce a venture’s growth ambitions and the extent to which employees are hired (Bosma and Levie 2009; Baughn et al. 2010): strong employment protection reduces the venture’s flexibility to dismiss employees in response to changes in the business environment or in case of low employee performance (Estévez-Abe and Iversen 2001; Hall and Soskice 2001b). This, in turn, increases the risks of hiring employees (Davidsson and Henrekson 2002; Henrekson et al. 2010). Accordingly, Bornhäll et al. (2016) point to the Swedish case, where employment protection (in this case exemptions from the last-in/first-out principle) becomes more severe once a venture employs more than ten workers: accordingly, the authors illustrate that the likelihood of hiring employees decreases significantly once ventures come close to this threshold which, in turn, illustrates the negative influence of rigid labor-market institutions on employee hiring.

Similarly, labor-market institutions have been found to influence the attractiveness of engaging external service providers compared to employees. Based on a principal-agent model, Parker (2010) illustrates that rigid labor-market institutions increase the tendency of firms to hire external service providers in order to circumvent employment constraints, such as payroll taxes. In line with these findings, Román et al. (2011) show that rigid labor-market institutions encourage companies to re-hire employees as self-employed service providers instead of extending employment contracts. Given that employment protection becomes more severe once ventures reach specific employee thresholds, and given that the consequences of hiring under-performing employees are more severe for small ventures than for large firms (Davidsson and Henrekson 2002), it can be expected that the preference of hiring service providers rather than employees is particularly acute in new ventures.

The above reasoning leads us to expect that

Also, the nature of the good (product or service) developed has been found to influence the number and type of gestation activities carried out—and thus the participation of founders and employees—during venture creation (Gordon and Davidsson 2013). On the one hand, ventures developing products require more resources than service developers (Ruef 2005); on the other, they are also more likely to pursue growth strategies due to their stronger need to achieve economies of scale (Audretsch et al. 2004). Consequently, a study of the Dutch hospitality sector finds that the growth patterns of small service ventures differ from those of small manufacturing ventures (Audretsch et al. 2004).

With regard to the involvement of founders in venture creation, Petrova (2012) explains how the more limited need for resources and slow growth trajectories lead to significantly higher shares of part-time entrepreneurs running business service rather than manufacturing ventures. These findings are supported by Germany’s self-employment statistics in 2008, where the share of part-time entrepreneurs amounted to 15% in manufacturing and 36.2% in service ventures (Buddensiek et al. 2013).

With regard to the hiring of employees, Fritsch and Weyh (2006) illustrate that, on average, German manufacturing ventures do not only start out with more employees than their service providing counterparts; they also follow different growth trajectories during their first years of existence, so that the number of employees increases more substantially in product manufacturing than in service-providing ventures.

The above reasoning leads us to expect that

Finally, the innovativeness of a venture’s business idea is also likely to influence the team formation approaches chosen. The innovation literature highlights that those ventures which develop new business ideas, rather than imitating existing ones, can either be radically or incrementally innovative. While incremental innovators improve existing (technologies of) business ideas, radical innovators develop entirely new ones (Abernathy and Clark 1985). Depending on the type of innovation a venture develops, it faces different challenges (Amason et al. 2006; Samuelsson and Davidsson 2009). Ventures developing radical innovations mostly require tacit knowledge (Mascitelli 2000), because “most knowledge is created and stored within individuals” (Grant 1997). Therefore, the configuration of ventures’ internal labor resources, that is founders and employees, is especially relevant for innovative ventures (Andries and Czarnitzki 2014).

With regard to founder involvement, this implies that founders need to carry out more and a broader range of gestation activities (Amason et al. 2006; Samuelsson and Davidsson 2009) in order to master the higher levels of uncertainty and complexity related to radical innovations (Liao and Welsch 2008; Samuelsson and Davidsson 2009). Consequently, ventures developing radically innovative business ideas are more likely to be created by large founder teams, because they tend to have more, and more diverse, resources at their disposal (Eisenhardt et al. 1990; Wiersema and Bantel 1992).

In line with this reasoning, ventures developing radical innovations also hire employees earlier and more substantially (Freel and Robson 2004). Given that the building up of tacit knowledge is both cost- and time-intense, it only pays off for ventures if employees are retained over longer time periods (Becker 1962; Virtanen et al. 2003). Consequently, radically innovative ventures can be expected to retain their employees for longer time periods than incrementally innovative ventures or imitators.

Accordingly, innovative ventures rely less on external service providers than imitative ventures, because the latter are more willing to accept limited tacit knowledge in return for the increased flexibility to increase, or decrease, their pool of external service providers (Chandler et al. 2009).

The above reasoning leads us to expect that

What have we learned about possible approaches to team formation during venture creation and their drivers? Most importantly, our analyses lend support to the underlying assumption of both the stage-based (Levie and Lichtenstein 2010) and the activity-based literatures (Liao et al. 2005; Gartner and Shaver 2012) that team formation processes are “order, not chaos.” Yet, in contrast to the stage-based literature, we did not find one best way of organizing team formation during venture creation. Instead, we identified seven distinct ways in which founders contribute to venture creation (ranging from part-time entrepreneurship to strongly growing founder teams), six different approaches toward hiring employees (ranging from no hiring to the immediate hiring of numerous employees), and five distinct ways of engaging service providers (also ranging from the engagement of no service providers to a high number thereof). Most importantly, these approaches differ from each other in the extent to which they are static or, respectively, dynamic: while static approaches are characterized by a stable number of founders, employees, or service providers contributing to venture creation, their number varies throughout the venture creation process in dynamic clusters—whereby it is interesting to note that, with one exception, all dynamic approaches are characterized by an increase, rather than a decrease, in team size.

Interestingly, the approaches taken toward founder, employee, and service provider involvement during venture creation partly correlate with each other. In other words, the extent to which founders engage in venture creation on the one hand, and hire employees and service providers on the other hand, is partly correlated. With regard to founder and employee involvement, we observed additionality effects as previously described in the literature (Cooper et al. 1989; Reynolds and White 1997), meaning that founders who only engage part-time in venture creation often also abstain from hiring any employees. Similarly, ventures whose founder team grows slowly over the venture creation process also slowly increase their employee base by about one employee over time. The same holds for high-growth ventures that are characterized by both substantially growing founder and employee teams. Interestingly, such additionality effects could only be observed for internal labor resources, i.e., between founder and employee involvement. Systematic correlations between founder and service provider approaches could not be observed. Finally, and in line with (Román et al. 2011), we found some substitution effects in the extents to which employees and service providers are engaged in venture creation as ventures tend to rely on service providers in those moments where hardly any employees are hired, and vice-versa.

Finally, we showed that several structural conditions influence which approach is taken toward founder involvement, employee hiring, and service provider engagement. Accordingly, we saw that the nature of the good developed (product or service) often influences team formation approaches, while labor-market institutions and the innovativeness of a venture’s business idea partly impacts on team formation processes: contrary to service developers, product developing ventures are characterized by part-time founders, the late but intense hiring of employees, and the early and intense hiring of service providers (see Audretsch et al. 2004; Fritsch and Weyh 2006). Furthermore, the team formation processes of incrementally innovative ventures are hardly characterized by part-time founders but rather by slowly increasing founder teams and the systematic hiring of employees. Finally, rigid labor-market institutions imply that ventures grow their founder team rather slowly, do not impact the approach taken toward employees hiring, but make that ventures substantially rely on external service providers to get the work done. Overall, and in line with the VoC literature (see Hall and Soskice 2001b), our results thus suggest that institutional labor-market rigidity leads to small-scale growth.

Furthermore, our paper also offers important methodological contributions. By applying optimal matching techniques to analyze venture creation processes, we illustrate how this novel methodological approach can be used in business and management research. Our research thus offers a methodological answer to the long-standing call for systematic insights into how venture creation processes unfold over time (Van de Ven and Engleman 2004; Ruef 2005; Moroz and Hindle 2012). In addition, we developed a new way to determine the distances between sequences of highly different lengths, a problem that is frequently occurring in social processes (Aisenbrey and Fasang 2010). We hope that our methodological advancements can contribute to, a much needed, better understanding of longitudinal data in the context of venture creation.

Like virtually all research, our study has its limitations, which pave the way for future research. To better assess the impact of different labor-market institutions, a broader database including data for more than two countries would be highly useful. Besides broadening the existing database, future research should also focus on other drivers of team formation than the ones we considered. This is particularly true as the low R²-values of our regression analyses indicate that other factors than the ones included exist that have a significant influence on a venture’s team formation approach. These factors might also include internal and time-dependent characteristics of ventures, such as the funding acquisition process of a venture. Finally, future studies would also provide novel and highly appreciated insights if they could link team formation processes to specific outcomes, such as venture success.

With our exploration of team formation processes, we have investigated a part of venture creation that has mostly been a black box in the past. While previous research has chiefly studied the link between venture characteristics and the outcomes of venture creation, namely growth and success, we here provide a detailed account of how team formation plays out between the starting and end point of venture creation. By uncovering that distinct team formation processes exist, and what they look like, we have been able to discern differences in venture creation that have, to date, been largely ignored.