Team versus Networks

Abstract

Diversity in knowledge is often regarded as beneficial to small firm performance. University spin-off firms, established to develop new products/services towards market introduction, are typically exposed to diversity in knowledge, through the founding team’s background and/or through external networks. Growth of university spin-off firms is usually modest, and this raises questions on what matters most for them, diversity in the founding team or in the network and whether benefits increase or decrease with growing diversity. Results are derived from a sample of 105 university spin-off firms and application of linear and curve-linear regression models of firm growth. The following trends are observed. First, influence of network diversity is stronger compared to influence of team diversity for employment growth, not for turnover growth. Further, influence of network diversity is overall positive, while influence of team diversity is negative for turnover. With regard to curvilinear patterns, diversity in social networks (different partners) tends to cause increasing returns in both employment and turnover growth, while diversity in working experience in the team tends to cause decreasing returns for turnover. Overall, this study confirms relatively strong and more positive influence from network diversity (social networks) in early years. The results are helpful in increasing awareness on these issues in incubation support programs.