Top management team process, shared leadership, and new venture performance: a theoretical model and research agenda

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Abstract

In this paper, we take a behavioral integration perspective [Strategy Leadersh. 25 (1997) 24] in articulating the process through which new venture performance may be explained. In so doing, we integrate concepts from entrepreneurship, top management teams (TMT), group process, and leadership research and propose an input–process–output model for examining new venture TMT (NVTMT) and new venture performance. More specifically, shared leadership is conceptualized as an important antecedent of our process variables—cohesion and collective vision—which in turn are conceptualized as being positively and reciprocally related and important antecedents of new venture performance. Our model also proposes several moderators that may change the relationships in the model.

Introduction

In this paper, we focus on the potential determinants of high-potential new ventures as opposed to income substitution small businesses. The determinants of high-potential new venture performance have been theoretically proposed and empirically examined for some time Chrisman et al., 1998, Sandberg & Hofer, 1987. New venture performance has typically been defined along two dimensions: (a) survival and (b) success (Chrisman et al., 1998). Research in this area encompasses a broad range of explanatory variables including the entrepreneur, industry structure, business strategy, environmental conditions, resources, and organizational structure and process. More specifically, many researchers have argued that the entrepreneur is an essential determinant of new venture performance Carland et al., 1988, McClelland, 1961. However, Chrisman et al. (1998) conclude that in spite of research that attempts to establish the entrepreneur as a determinant of new venture performance, the evidence has been inconclusive. Thus, an important purpose of this paper is to articulate a framework for understanding the relationship between entrepreneurs and new venture performance.

One possible explanation for the lack of conclusive evidence regarding the role of the entrepreneur in achieving new venture performance is that the unit of analysis has been incorrectly identified. While many researchers have focused on the entrepreneur as a lone individual (Hofer & Sandberg, 1987), others have suggested that the new venture team is, perhaps, a more appropriate level of analysis Ensley et al., in press, Roure & Madique, 1986. Hambrick (1997) concluded that “a firm's strategic performance—how a strategy is selected and implemented and in turn how the organization performs—depends not so much on the characteristics, behaviors, and background of the chief executive officer (CEO) alone, as it does on the sum of the characteristics, behaviors, and experiences of the entire senior executive group and how they are able to work together to take full advantage of these strengths” (p. 25). Perhaps then, the role of the entrepreneur in achieving new venture performance is best captured by examining the new venture top management team (NVTMT) as a whole.

While TMT research in established firms abounds Finkelstein & Hambrick, 1996, Hambrick & Mason, 1984, Knight et al., 1999, little research has focused on the TMT of the new venture. Therefore, our purpose is to develop a theoretical model of new venture performance using a vast body of literature on entrepreneurship, TMT, group processes, and leadership. Our intent, with this model, is to provide a springboard for future research that encourages cross-disciplinary approaches and refocuses attention on entrepreneurial behavior in the creation of new venture performance.

Section snippets

Initial research of the NVTMT

Eisenhardt and Schoonhoven (1990) studied the characteristics of founding TMT of technology-based ventures as related to sales growth of the new ventures. They justified their focus on the founding TMT, arguing that new ventures are inherently unique and differ from established firms. Following Stinchcombe (1965), Eisenhardt and Schoonhoven established that young firms have a higher propensity to fail and their liabilities of newness present unique challenges to the NVTMT.

Additional research

The upper echelon perspective and TMT research in established firms

Hambrick and Mason's (1984) upper echelons theory suggests that top managers have a great impact on the decisions made in firms and ultimately on the outcomes achieved by firms. Hambrick and Mason state that the characteristics of the TMT members are “determinants of strategic choices and, through these choices, of organizational performance” (p. 197).

Priem, Lyon, and Dess (1999) conclude that the upper echelons perspective has been empirically operationalized by researchers measuring

Shared leadership

Yukl (1998) defined leadership as “influence exerted…over other people…in a group or organization” (p. 3). Leadership has been linked to effective strategic decision making Eisenhardt & Bourgeois, 1988, Korsgaard et al., 1995, Thomas, 1988 and to entrepreneurial firm performance (e.g., Baum, Locke, & Kirkpatrick, 1998). However, there have been critics of leadership research. For example, Meindl and Ehrlich (1987) have suggested that researchers have a romanticized conception of leadership and

Potential moderating effects—the context of the new venture

Several researchers have suggested that moderators are needed to fully understand TMT performance Ancona & Caldwell, 1989, Hambrick, 1994, Simons & Pelled, 1999. To understand and explore potential moderators of the NVTMT process, we must begin by examining the unique context in which new ventures exist.

Chrisman et al. (1998) argue that the importance and form of decisions and problems faced by the new venture are unique from those experienced in established firms. New ventures are different

Conclusion

We have provided a basic model of NVTMT process constructs and their relationship to new venture performance. In addition, we have addressed at least a portion of the contextual variables that may serve to moderate the development of positive TMT processes particularly in the new venture environment. We consider our model an exploratory attempt to begin to address the “intervening constructs” that Priem et al. (1999) suggest have been absent from TMT research. As Priem et al. conclude, “when

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