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Abstract

This study explores the role of entrepreneurial teams’ characteristics as determinants of entrepreneurial orientation (EO). Previous literature usually assumed the determinants of EO as given, and focused on the performance effects of EO. Although some theoretical concerns shed light on the role of entrepreneurial team influences on EO, a direct analysis of such positive association has so far been limited. This current study examines the positive influences of top talents and the possible influence of functional diversity of entrepreneurial teams on EO, as well as those of entrepreneur’s human and social capital. The results of 1,228 Korean business venture samples showed that the level of EO is determined by both the entrepreneurial team characteristics, such as human and social capital, and the existence of marketing top talents. However, supplementary subgroup analyses showed that these positive effects of an entrepreneurial team’s characteristics on EO are significant for the sample of “founders stay,” whereas the positive influence of an entrepreneurial team’s diversity as well as the existence of marketing top talents are significant for the sample of “founders left.” Based on these results, theoretical and practical implications are discussed.

Keywords

entrepreneurial orientation entrepreneurial team top talents founder turnover fault line

Introduction

Over the past 30 years, scholars of entrepreneurship have examined the positive role of teams in the entrepreneurial process (Kamm, Shuman, & Seeger, 1990; Timmons, 1975). It is difficult to run startup ventures with limited resources, and hence, in many cases, business ventures are prone to rely on entrepreneurship. It can be inferred that the factors of an entrepreneurial team’s characteristics may determine the pervasiveness of entrepreneurship at the firm level (Wales, Monsen, & McKelvie, 2011).

Among the firm-level constructs of entrepreneurship related to market and industries, the concept of entrepreneurial orientation (EO) is conducive in describing the entrepreneurial processes. As Miller (1983) suggested the concept of EO, the relationships between EO and firm performance has been the main consideration of previous literature. This may be because entrepreneurship is the process rather than the property of find market opportunities to realize aspirations by mobilizing scarce resources. Although some theoretical concerns have been applied to explain how EO can be created and developed (e.g., Wales et al., 2011), few empirical studies have examined the influence of the antecedents of EO in question, with the exception of Sciascia, Naldi, and Hunter (2006). Thus, research is needed to explore the factors that may influence the level of EO. A better understanding of EO can be drawn to examine the factors needed to develop and nurture EO, entrepreneurial team.

Previous research of entrepreneurial teams have focused on the role of entrepreneurial team characteristics, such as team composition on firm performance (Barney, Busenitz, Fiet, & Moesel, 1996; Eisenhardt & Schoonhoven, 1990; Hmieleski & Ensley, 2007). However, research is needed to explore how different engagements and commitment can be shared and developed in the entrepreneurial process (Chowdhury, 2005; Ensley & Pearce, 2001; Perry-Smith & Coff, 2011; Schjoedt, Monsen, Pearson, Barnett, & Chrisman, 2013; West, 2007). Recently, a few studies started to explore how formation and the change of formation, including dissolution of entrepreneurial team, are influenced by internal or external factors of the firm (Brinckmann & Hoegl, 2011; Chandler, Honig, & Wiklund, 2005; Colombelli, 2015; Fiet, Busenitz, Moesel, & Barney, 1997; Ucbasaran, Lockett, Wright, & Westhead, 2003). However, more research is required to examine the possible role differentiation of entrepreneurial teams.

Some scholars who emphasized upper echelon theory view entrepreneurship as an outcome of shared interactions among team members (e.g., Schjoedt & Kraus, 2009). The current study, in a line with this argument, provides an opportunity to examine the role of entrepreneurial teams by adding new insights of entrepreneurial team characteristics on EO. In particular, this current study hopes to aid researchers and practitioners in the field of entrepreneurship by describing how EO can be influenced not just with the entrepreneur but by different members within the entrepreneurial team. Moreover, the current study hopes to provide insight by suggesting how these influences can be prominent in different contexts, such as founder turnover.

This article is organized as follows. First, in the “Research Background” section, research streams are identified based on both previous empirical researches of EO and of entrepreneurial teams. Next, sets of hypotheses are presented to address the important role of entrepreneurial teams on EO. Finally, theoretical and practical implications with limitations are discussed, based on the analysis results.

Research Background

Previous Research on Entrepreneurial Team

Scholars who have interests in the formation of entrepreneurial team have usually focused on the role of the founder’s leadership or vision in entrepreneurial team (Preller, Breugst, & Patzelt, 2016; Schjoedt et al., 2013), and also examined the role diversity of individuals in team, which is usually measured by demographic characteristics among team members. As the entrepreneurial outcomes are, more or less, attributable to the developed value by founders and team members’ mutual expectations through entrepreneurial process, other scholars addressed the issue of cultural characteristics among team members such as shared value and trust (Khan, Breitenecker, Gustafsson, & Schwarz, 2015).

As recent two Meta analyses from to date confirm (Bell, Villado, Lukasik, Belau, & Briggs, 2011; Joshi & Roh, 2009), the role of the context in entrepreneurial team is necessary to consider a better explanation of the team formation and dynamics (Pelled, Eisenhardt, & Xin, 1999). With a line with those suggestions, recent scholars have focused on the conflicts and power plays among team members (Khan, Breitenecker, & Schwarz, 2015; Schoss, Mauer, & Brettel, 2017). Studies have confirmed that this approach is important to consider the overall impact of team dynamic processes such as trust, conflict, and cohesion in a team, not to mention overall performance or emotional outcomes such as satisfaction (Li & Hambrick, 2005; Thatcher, Jehn, & Zanutto, 2003). This is useful for reviewing team dynamics within an entrepreneurial team because there are subgroups within a team and those subgrouping may influence on the performance of an entrepreneurial team.

When subgroups are visible, it is easy to trust opinions among members of small groups (Abrams, Wetherell, Cochrane, Hogg, & Turner, 1990). The coalitions within subgroups are due to the similarities and differences of individual characteristics, thus some scholars are prone to highlight the plurality of division lines. The coalition between subgroups is also a set of members who collectively manage their resources on specific issues (Murnighan & Brass, 1991). Likewise, subgroups within a team can promote active communication and cooperation with members, but differences in heterogeneity between subgroups can produce a negative impact on team atmosphere (e.g., Roach & Sauermann, 2010).

It is a really interesting phenomenon yet to be examined, about the influence on the change of formation in entrepreneurial team. For example, when newcomers do retain similarities with existing team members, the distinction between new and old member becomes less important. When an important member such as founder leave and/or influential members such as top talents to join an existing team, the changes in a team’s dynamics can be truly significant. Such fundamental changes in team composition deserve to examine but was not fully explored (Lau & Murnigan, 1998). The addition of new members into the established team may introduce the possibility of the restructuring of old composition and may trigger the change of fault line of the existing subgroup’s norm.

In sum, scholars regard the action and interaction of members in entrepreneurial team did not occur in a vacuum, yet did not clearly address the influences of powerful individuals in entrepreneurial team (e.g., Khan, Breitenecker, Gustafsson, & Schwarz, 2015; Khan, Breitenecker, & Schwarz, 2015). Thus, scholars have started to highlight the conflicts rather than harmony among team members including those of founders and members. A further research is needed to focus on team dynamics capturing beyond the concept of diversity to dynamics with respect to the phenomenon to examine the fault line within teams.

Previous Research on the Determinants of EO

For three decades, researchers have focused on the relationship between EO and firm performance and argue that EO can be a source of competitive advantage of small and medium-sized business ventures (C. Lee, Lee, & Pennings, 2001; Wiklund, 1999; Yoon, 2015). However, relatively little attention has been paid to the question of “how can EO be developed throughout the entrepreneurial process?” The reason may be that the concept of EO is not easy to grasp in the entrepreneurial processes, with reference to the authors in this field (Miller, 2011; Yoon, 2015).

Also, the theoretical arguments of EO research are based upon the framework of both Covin and Slevin (1991) and Lumpkin and Dess (1996). There are at least two different claims associated with the development of EO. The first relates to the traditional claim of EO, that is, firm-level entrepreneurship can be determined by the founder who established the new ventures. This implies that the role of the individual entrepreneur, who has human and social capital, can be a major source of EO (Coleman, 1988). As the entrepreneurial process is the process of an entrepreneur who finds an opportunity and integrates scarce resources with his or her entrepreneurial team of aspiration, it is necessary to consider their role in creating and developing EO.

However, it is surprising that there is not much prominent research to explore the determinants of EO, with an exception of Sciascia et al. (2006). Sciascia and her colleagues explored the determinants of EO categorized by following factors: (a) environmental-related factors, such as environmental dynamism and heterogeneity; (b) organization-related factors, such as organizational formalization and access to resources; (c) individual-related factors, such as CEO experience and CEO educational background; and (d) market orientation. Although Sciascia and her colleagues reflect the nature of business ventures in a thorough manner, they do not consider the influence of an entrepreneurial team as a determinant of EO.

It is natural to presume that there are interactions between the entrepreneur and team members within an entrepreneurial team (Wales et al., 2011). Thus, it would be interesting and advantageous to examine the composition of entrepreneurial teams as this can be a major source influencing the creation and development of EO (Covin & Slevin, 1991; Zahra, 1993). Due to this, we focus on the formation of entrepreneurial teams, and hope to provide information how EO can be developed through entrepreneurial processes. As innovative, proactive, and risk-taking behavioral tendencies may create business opportunities, the ones who argue the role of diversity in team made us to believe that the fate of business ventures is not just determined by the individual entrepreneur (De Clercq, Dimov, & Thongpapanl, 2011, 2013).

The second claim is from the upper echelon theory, which argues that the collective cognitive understanding and collective decision making in entrepreneurial processes can explain how the firm-level entrepreneurship, such as EO, can be developed through entrepreneurial processes (Carpenter, 2002; Colombelli, 2015; Hambrick, Cho, & Chen, 1996; Hambrick & Mason, 1984; Wiersema & Bantel, 1992). These two theories lead us to examine how EO can be developed, not just by the entrepreneur but also by members in the entrepreneurial team.

What we Need to Know in Practice

The entrepreneurial processes must be understood in a holistic manner to identify factors that promote their shared development between entrepreneur and other members in the entrepreneurial team. As new business ventures are usually established by the entrepreneurial team rather than just the entrepreneur (Schjoedt et al., 2013), the identification of contextual interactions can be conducive to our understanding of entrepreneurial processes. As Miles and Arnold (1991) also pointed out, previous research has considered who possess knowledge and how knowledge is created by the interaction of the entrepreneur and entrepreneurial team. Thus, we need to know what kind of outcomes can be drawn from different players in the entrepreneurial team. In particular, it is important to consider entrepreneurial team composition, and which internal roles can be separated from the entrepreneur in determining the level of EO.

However, we need a new perspective on how much different marketing orientation can be influenced by either the entrepreneur or other important members in the entrepreneurial team. Although some studies provide good insights for scholars who studied entrepreneurial teams, in practice, EO is influenced by top talents in an entrepreneurial team. Although Covin and Slevin (1991) did not clearly discuss the role of the entrepreneurial team, other scholars in different contexts made us to examine the effects of entrepreneurial team in determining EO (e.g., Wales et al., 2011). Mueller and Gemünden (2009) examined how entrepreneurial processes, such as communication and coordination within the entrepreneurial team, influence customer and competitor orientation.

In a line with these arguments, this study would like to focus on the role of marketing top talents in the entrepreneurial team, and highlights the importance of the top talent existence in the entrepreneurial team, as well as those of the entrepreneur. By utilizing the logic of top talent, we hope to provide a more realistic explanation in determining the level of EO. First, with an upper echelon theory stance, we will examine the role of the top talents in an entrepreneurial team. In South Korea, there was a trend of employees moving from large companies, such as Samsung or Hyundai, to startup business ventures. As Lee and Yoon (2007) identified, this trend in South Korea triggered companies to demand top talent. With demand exceeding supply, there is a war for top talent; however, at the same time, business ventures, such as Iriver, Hancom, and Daum have benefited the most from these top talents. It is known that top talents collaborated with existing entrepreneurs in business ventures effectively develop entrepreneurship (Lee & Yoon, 2007). Their valuable, but rare and hard to imitate or substitutable, skills and abilities were regarded as the growth engine for business ventures.

In South Korea, some new ventures initiate and develop new market opportunities. The firm-level entrepreneurship was developed through the entrepreneurial process. Anecdotal news articles in South Korea have reported that innovative, proactive behavior drive firms to succeed. Yet, there is still insufficient information provided to help us understand how the attitude toward risk taking, orientation toward innovativeness and proactiveness of businesses are influenced by different factors (Yoon, 2012b). For example, iriver was the first business venture to invent MP3 players and create the industry market segment. Yoon (2012a) reported how EO can be developed from internal and external factors with interviews with entrepreneurs, and generally supporting the framework, as suggested by Covin and Slevin (1991). As Yoon (2012a) identified, one of the main drivers for creating and developing EO is the diversity of the entrepreneurial team (Yoon, 2012b). The cases mentioned above lend support to the idea that the diversity of team members in an entrepreneurial team may contribute to the development of firm-level attributes, such as EO. This approach may provide a good opportunity to examine how these shared attributes can be formed in the process of entrepreneurial team. The clues from South Korean business ventures may raise a question how on EO of Korean business ventures are influenced by entrepreneurial teams.

Research Questions and Focus

As we argued above, there exists limited knowledge of role of entrepreneurial teams in developing EO. If we consider top talents who have valuable knowledge, skills, and abilities to make an entrepreneurial process work, it is more likely to produce valuable outcomes to understand the role of entrepreneurial teams as determinants of EO (Cooney, 2005). By comparing the role of marketing orientation from an entrepreneur and the top talents in the entrepreneurial team who have comparable skills, we hope to provide a better explanation on how startup ventures form and develop EO in extreme uncertainty (Davidsson & Honig, 2003; Klotz, Hmieleski, Bradley, & Busenitz, 2014). Thus it is valuable to answer the following question:

Research Question 1: Which of the entrepreneurial team’s compositional influences are relevant on EO? What is the impact of the top talents in an entrepreneurial team on EO in particular?

Also, we need to expand the scope from the founder entrepreneur context to founder turnover context. Studies have started to explore other important but neglected factors by asking, “After startup ventures were founded, what other factors may have an influence on EO?” To answer this question, some scholars, such as Sciascia et al. (2006), emphasized the role of market orientation, as well as the influences of the entrepreneur (CEO). When we consider the entrepreneurial team, however, it would be reasonable to look the market orientation can be attributable to the team members including top talents, as well as the entrepreneur. Since the formation of business ventures, the entrepreneurial team members are continuously influenced by other team members within the entrepreneurial team. This demands exploring the role of top talents in entrepreneurial teams on EO. While this framework is still the most referenced theory in the field, research has not yet been able to arrive at a clear-cut answer for these issues (Schoss et al., 2017). Thus, this allows us to take a closer look inside the entrepreneurial team of business ventures with an upper echelon theory stance. It is thus important to answer the following question:

Research Question 2: Does founder turnover show a certain pattern in the EO configuration? What are the effects of entrepreneurial team characteristics on EO when founders leave the company?

Hypotheses Development

The Influence of Entrepreneur’s Human Capital

Entrepreneur related factors are mainly related to whether a firm’s orientation is toward developing EO. Human capital pertains to the individuals’ knowledge and abilities that allow for the creation and changes in action (Coleman, 1988). Usually, human capital theory maintains that knowledge provides individuals with increases in their cognitive abilities, leading to more productive and efficient potential activity (e.g., Becker, 1964). The founder’s human capital may be developed through formal training and the education of the entrepreneur, and these characteristics are known to have positive relationships with EO. For example, industry-specific knowledge derived from diverse experience can be conducive to the EO. Different functional backgrounds, such as broad labor market experience, as well as specific vocationally oriented experience, can be predictors to increase human capital (Becker, 1964; Chandler & Hanks, 1994).

Several researchers have examined the education and industry experience of entrepreneurs on the growth and performance of entrepreneurial ventures (Hayton, 2004; Storey, 1994). In addition, education will change “cognitive” processes within the individual, which may provide new skills for solving complex problems (Gustaffson, 2004). Likewise, some scholars who emphasize the role of team members stressed that top management teams’ (TMTs) level of formal education can be a determinant of strategic risk taking. For example, Barker and Mueller (2002) provided evidence that more highly educated top managers took more strategic risks. Li and Tang (2010) also found that highly educated top managers are more confident in their knowledge, leading them to choose more risky strategies. This research may imply a positive association between top managers’ human capital and the level of EO.

These results show that the power of an entrepreneur’s existing knowledge and experience may help create and nurture EO. Miller’s (1983) study also indicates that the level of an entrepreneur’s education was shown as a major influence on EO, particularly in small companies competing in homogeneous environments. Likewise, the higher education level of the entrepreneur can be seen as a source of prior knowledge that can be crucial in identifying entrepreneurial opportunities (Shane, 2000). However, empirical support for the positive impact of the entrepreneur’s human capital, which is measured by education on entrepreneurship, is scarce. Hence, we have the following hypothesis:

Hypothesis 1: The higher the education level of the entrepreneur, the higher the level of EO at the firm level.

The Influence of the Entrepreneur’s Social Capital

Social capital is often operationalized through the identification of networks. Likewise, formal and informal social relationships have been known to help a firm to run a business. Although social capital is regarded as a multidimensional concept that occurs at both the individual and the organizational levels (Adler & Kwon, 2002), it may assist with the entrepreneurial exploitation process by providing and diffusing critical knowledge and information. Social capital can be defined as the sum of the resources that the entrepreneur can access by maintaining the relationships and networks that can be sustained (e.g., Maurer, Bartsch, & Ebers, 2011). From an entrepreneurial perspective, however, social capital provides networks that facilitate the discovery of opportunities, as well as the identification, collection, and allocation of scarce resources (Greene & Brown, 1997). As small ventures usually have insufficient abilities for the acquisition and utilization of resources and capacity, value creation opportunities are largely due to taking advantage of the knowledge base from outside (Yli-Renko, Autio, & Tontti, 2002). The social capital of the entrepreneur may assist members by exposing them to new and different ideas, and world views; in effect, providing them with a wider frame of reference, both supportive and nurturing the new potential idea in an entrepreneurial team (Aldrich & Zimmer, 1986). Similarly, Starr and Bygrave (1991) showed that the operations controlled by a founder-owner who has a diverse functional background has a strong influence on entrepreneurial process. Zahra (1993) also notes that a founder’s experience and background may be important antecedents of firm-level entrepreneurship.

Although empirical results are not sufficient (Davidsson, 1989), there are some studies showing that relevant experience is thought to increase the familiarity with various work-tasks, thus making it easier for an entrepreneurial team to solve problems, and finding effective solutions in entrepreneurial processes (Gustaffson, 2004). As social capital is dealing with the problem of resource access and mobilization, an entrepreneur’s diverse affiliation from different workplaces and backgrounds may help them to develop social capital (Lin, 1998). A positive relationship has been predicted between an entrepreneur’s filed experiences with diverse field areas related with EO (Wiklund, 1999). With these rationales, we propose the following hypothesis:

Hypothesis 2: The more diverse the affiliation background of the entrepreneur, the higher is the level of EO at the firm.

The Influence of Top Talents in an Entrepreneurial Team

The existence of top talents in an entrepreneurial team is important to create firm-level entrepreneurship. Top talents are individuals who have rare, valuable, and distinct capabilities that cannot be easily imitated or substituted (K. Lee & Yoon, 2007). Their valuable knowledge, skills, and abilities are hard to duplicate or substitute. Interacting with these top talents, entrepreneurial team members will be able to develop knowledge and insight to manage the entrepreneurial processes which, in turn, is necessary for maintaining entrepreneurial success. Usually firm-level entrepreneurship is known to be influenced by the founder; yet, sometimes entrepreneurial processes can be led by another important player in the entrepreneurial team, including at the time of founder turnover.

Although the positive association between top talents’ existence in an entrepreneurial team on EO is not clearly examined, experimentation and novel ideas in an entrepreneurial team are more likely to flow when they are empowered by some talented person. In particular, the existence of marketing top talents is crucial for entrepreneurial team members to behave innovatively, and taking risks when bold action is required. The entrepreneurial team members can understand the customer and market, and a more proactive posture is possible with information-based conceptualization of the market, such as collecting, disseminating, and responding to intelligence about the market (Jaworski & Kohli, 1993). Although we do not have enough evidence of this, Welbourne and Andrews (1996) study the role of human resource executives in TMTs at the stage of initial public offerings (IPOs). Thus, we can speculate that the existence of marketing top talents in founding a team may have a positive influence on the level of EO. Hence, we have the following hypothesis:

Hypothesis 3: The existence of marketing top talents in an entrepreneurial team may have a positive relationship with the level of EO at the firm level.

The Influence of Functional Diversity in an Entrepreneurial Team

Entrepreneurial processes can be seen as the result of combining existing and new resources (Schumpeter, 1934). Functional diversity within entrepreneurial team members will be a positive influence on EO. The reason may be that the division of labor may provide opportunities to share knowledge and specialize to learn how to act on and authorize diverse activities in entrepreneurial processes. Distinctive human capital held by individuals within an entrepreneurial team can be seen as a source of knowledge (e.g., Lepak & Snell, 1999). The functional diversity of the entrepreneurial team can internalize the knowledge creation with learning from other team members, and also new knowledge can be generated with the interaction of diverse functional backgrounds within the entrepreneurial team. Hence, knowledge can be critical in maintaining the entrepreneurial process.

Entrepreneurship scholars believe that a lower degree of formalization spurs the emergence of new ideas (Covin & Slevin, 1991; Zahra, 1993). For example, some scholars have emphasized the importance of knowledge combination capabilities in determining strategic innovation (Teece, Pisano, & Shuen, 1997). Firms where operations and procedures are organized by formal rules are less likely to facilitate innovation, as they are more oriented toward realizing processes than goals (Barringer & Bluedorn, 1999). These help us to predict higher EO when the functional diversity of entrepreneurial team is high (Smart & Conant, 1994). Recent publications have reported that the role of diversity in an entrepreneurial team may have positive impacts on performance with the logic of entrepreneurial team diversity (Khan, Breitenecker, Gustafsson, & Schwarz, 2015; Khan, Breitenecker, & Schwarz, 2015). Based on these ideas, the overall EO can be higher with higher functional diversity in entrepreneurial team. Hence, we have the following hypothesis:

Hypothesis 4: The higher the functional diversity in an entrepreneurial team, the higher the level of EO at the firm level.

Method

Data and Sample

We obtained data from the 2010 Venture Precision Survey (VPS), collected by the Korea Venture Research Institute (KOVRI) in collaboration with the Small and Medium Business Administration of South Korea. The sampling frame represents Korean venture companies that satisfy the following criterion: (a) firms that began with new technology development projects, (b) firms that produce product/services by applying patent technologies, and (c) firms that have invested considerable amounts in research and development activities (e.g., Lee et al., 2001).

The KOVRI used the stratified sampling method to select representative samples of 2,065 venture companies (17% usable responses) from six different technological categories, such as Information Technology, Bio Technology, Environmental Technology, Space Technology, Cultural Technology, Nano Technology from 22 industries: “Agriculture, Forestry, Fishery and Mining”; “Food and Beverage”; “Textile, Sewing, and Fur”; “Paper Manufacturing”; “Print and Rubber”; “Petroleum and Chemical”; “Metal and Non-metal”; “Machine and Equipment”; “Electric Devices”; “Electronic Components”; “Precision Engineering”; “Electronics Equipment”; “Machine Equipment”; “Automobile and Transportation Equipment”; “Furniture and other Manufacturing”; “Manpower and Educational Services”; “Disposal of Waste Matter”; “Construction”; “Dealing and Retail Distribution”; “Book Publishing”; “Broadcasting and Telecommunications”; and “Professional Services.” The collected firm-level data is not proportionally distributed into different geographical locations, with regional distribution ranging from Kangwon, Kyunggi, Chungbook, Chungnam, Kyungbook, Kyungnam, Jeonbook, Jeonnam, and Juju.

The respondents of the survey are limited to either the owner or the general manager of the firm, a feature of the data that distinguish itself from other survey-based datasets. The respondents were contacted by phone to clarify any incomplete data. A total of 2,065 cases were compiled as usable data, but we then select 1,538 firm-level data samples of business ventures. The focus of this study is to examine the context of the growing stage of business ventures to explore the different effects of the founder and the entrepreneurial team characteristics for the entrepreneurial process. By selecting cases with a firm age of less than 10 years since establishment, the current study reflects the growth stages of business ventures.

As a result, a total of 1,228 samples were used to examine the hypotheses. We believe that startups that are less than 10 years old are a representative sample to examine the entrepreneurial process. For the categorization criteria, we used 10 years as a cutoff value to distinguish young from old-aged firms because the hazard rate of new ventures was found to decline rapidly around 10 years after founding (Woo, 2013; Yang, 2014). There are no significant mean differences of testable variables between our final samples with deleted samples. The average number of employees per company in the sample was 19.6 and the average firm age was 5.6 years.

Measurements

Dependent variable

The dependent variable of the current study is EO. The EO variable was measured by an index of nine survey items (Knight, 1997), which were adapted from the original scale of Covin and Slevin (1989): (a) “have a strong emphasis on R&D, technological leadership, and innovations”; (b) “retain very many new lines of products or services”; (c) “changes in product or service lines have usually been quite dramatic”; (d) “a strong tendency to initiate actions that competitors respond to”; (e) “a strong tendency to be a leader, introducing new products, service, or technology first”; (f) “a strong tendency to adopt a competitive undo-the-competitors posture”; (g) “a strong proclivity for high-risk projects (with chances of very high returns)”; (h) “bold, wide-ranging acts are necessary to achieve the firm’s objectives”; and (i) “typically adopts a bold, aggressive posture to maximize the probability of exploiting potential opportunities.”

Several studies have used this scale including Wiklund (1999), which provides evidence of its validity and reliability. Principal components factor analysis with the varimax rotation was used to achieve higher convergent validity (Neter, Kutner, Nachtsheim, & Wasserman, 1996). The reliability score of the EO scale also achieved high internal consistency (Cronbach’s α = .82; Nunnally, 1978).

Independent variables

Human capital of entrepreneur

To measure the entrepreneur’s human capital, we graded the entrepreneur’s level of education. Usually, an educational level can be regarded to reflect one’s ability to act, thus by grading the founder’s educational level, we wanted to reflect the possession of the founder. For this, we graded 1 for founders who have an undergraduate-level education, 2 for a master degree, and 3 for a doctoral degree education.

Social capital of entrepreneur

To measure the entrepreneur’s social capital, we marked the entrepreneur’s experience of previous workplaces. To measure the diversity of industry experience of the entrepreneur, the KOVRI survey asked subjects to “Please check all your previous work experience in the field of work as the founder in the following fields”: (a) technological development, (b) marketing, (c) strategic planning, (d) finance, (e) management, (f) production, and (g) research and development. Thus, we aggregate the counted responses of previous experiences of diverse affiliation in different functional backgrounds of previous workplaces, no matter how many similar jobs they have. As social capital is dealing with the problem of resource access and mobilization, we count any functional position in previous workplaces as even and took the mean scores of different functional positions for the analysis (e.g., Davidsson & Honig, 2003). This approach is similar to the “position generator” suggested by Lin (1998), which measure a person’s social capital in ego networks. If a position has links with affiliations of different functional backgrounds, taking one position may have the equivalent power to access valuable resources (Lin, 1999).

Marketing top talents in the entrepreneurial team

To measure the entrepreneurial team factors, we operationalized the term of marketing orientation as a critical function for business ventures, and used 1 to denote if marketing top talents exist (Lee & Yoon, 2007).

Functional diversity of the entrepreneurial team

To measure functional diversity, we used Blau’s (1977) index of heterogeneity in terms of proportion of individual team member’s functional diversity in each area of function:

$D = 1 - \sum_{i = 1}^{n} p_{i}^{2},$

where p_i is the proportion of employees in each of the n functions, such as marketing, production, accounting and finance, in the functional area examined.

Control variables

In this study, we controlled several variables influencing the relationships between the entrepreneur’s human/social capital and EO, as well as the existence of marketing top talents in an entrepreneurial team. First, we controlled the effect of firm age and firm size. Firm size was measured as the log number of full-time employees, and firm age was measured as the log number of years since its establishment. The reason to control firm age is that new firms are usually more likely to experience the liability of newness (Stinchcombe, 1968). If initial founding conditions influence on the behavior of the future, it is necessary to control those influences on EO. Imprinting effects also led us to control firm age to reflect the influence on EO (Baron, Burton, & Hannan, 1996). The reason to control firm size is that there are possibilities of structural changes and the formalization of decision making, according to the increase of the number of employees within firms (Covin & Slevin, 1989). We also control the founding status of business ventures. As many business ventures start their business with an incubator, initial access to human and social capital is not independent to the founding status (Baron et al., 1996; Starr & Bygrave, 1991; Stinchcombe, 1968). Thus, we create founding status variables and denote 1 if the firm is independently established.

We then controlled the alliance diversity, summing up 13 types of strategic alliances, including licensing agreements of sales, technology, joint purchasing, distribution, and joint production and promotion, OEM (original equipment manufacturing), R&D alliance, the sharing of production facilities, collaborative training, and co-membership of trading associations. These numbers were then divided by 13 (e.g., Bae & Gargiulo, 2004).

Finally, we controlled the degree of environmental dynamism. Industry dynamism was measured by the standard deviation of industry sales volume after extracting the individual firm sales volume for the previous 3 years (2007-2009). This was calculated as the natural logged mean of standard deviation of 3 years’ sales volume of the industry, after extracting sales volume of each firm (Yoon, Lee, & Lee, 2012). The summary of each measurement is presented in Table 1.

Table 1.

Summary of Measurements.

Variables	Measurements
Dependent
Entrepreneurial orientation	Calculated mean of nine items of Covin and Slevin (1989) (innovativeness, proactiveness, risk taking)
Independents
Human capital	Calculated the education level of entrepreneur (Hayton, 2004)
Social capital	Counted the number of entrepreneur’s affiliation in different function of previous workplaces (Lin, 1999)
Marketing top talents	Counted “1” if there are marketing top talents in entrepreneurial team (Lee & Yoon, 2007)
Functional diversity	Calculated heterogeneity scores in functions of entrepreneurial team (Blau, 1977)
Controls
Firm age	Logged transformed value of (2010-Founding years)
Firm size	Logged transformed value of the number of permanent employees
Founding status	Counted “1” when business ventures are independently established
Industry dynamism	Calculated natural logged mean of standard deviation of 3 years’ sales volume of industry after extracting sales volume of each firm
Alliance diversity	Counted the mean of 13 types of strategic alliances

Model Specification

The ordinary least square regression method was applied to investigate the hypotheses presented in this study. First, to test the basic assumption of ordinary least square regression, residual analysis was conducted to test for heteroscedasticity and outliers. However, nothing significant was found. Also, the VIF (Variance Inflation Factor) score was examined to test collinearity, with no significant results found (Hair, Anderson, Tatham, & Black, 1998).

$\begin{matrix} EO = α + β 1 \cdot X 1 + β 2 \cdot X 2 + β 3 \cdot X 3 + β 4 \cdot \\ X 4 + β 5 \cdot X 5 + β 6 \cdot X 6 + β 7 \cdot X 7 + β 8 \cdot \\ X 8 + β 9 \cdot X 9 + ε i \end{matrix}$

where α is a Constant, X1 represents firm age, X2 denotes firm size, X3 refers to founding status, X4 denotes alliances diversity, X5 represents industry dynamism, X6 refers to human capital of entrepreneur, X7 denotes social capital of entrepreneur, X8 represents marketing top talents, X9 refers to functional diversity of entrepreneurial team, and εi denotes error term.

Results

Descriptive Statistics

Table 2 shows the descriptive statistics and correlations among all variables of interest. The correlation between EO and the human capital of the entrepreneur was positively related (r = .167). Also, the correlation between EO and the social capital of the entrepreneur was positively related (r = .074), and the correlation between EO and the existence of functional diversity of the entrepreneurial team was positively related (r = .141).

Table 2.

Descriptive Statistics and Correlations.

	Variables	M	SD	Minimum	Maximum	1	2	3	4	5	6	7	8	9
1.	Firm age^a	1.59	0.51	0.69	2.30
2.	Firm size^a	2.49	0.92	0.00	6.13	.285**
3.	Founding status	0.37	0.30	0.00	1.00	.162**	.021
4.	Industry dynamism	0.18	0.13	0.00	0.85	−.010	−.084**	.074**
5.	Alliance diversity	0.85	0.36	0.00	1.00	−.032	−.065*	.006	−.068*
6.	Human capital	3.65	0.39	1.00	4.00	−.043	−.129**	−.008	.089**	.002
7.	Social capital	2.17	1.40	1.00	8.00	−.049	−.007	−.024	.089**	.019	.036
8.	Marketing top talents	0.31	0.46	0.00	1.00	.012	.147**	.075**	.068*	−.036	−.014	.040
9.	Functional diversity	0.55	0.17	0.00	0.80	.063*	.085**	.142**	.033	.041	.018	.041	.147**
10.	Entrepreneurial orientation	3.52	0.51	1.44	5.00	.008	.056	−.030	.191**	−.002	.167**	.074**	.045	.141**

Note. N = 1,228.

Log-transformed value.

p < .05. **p < .01.

A business venture with an entrepreneur who has a higher level of human and social capital is more likely to be in a dynamic industry (r = .089, r = .089, respectively). A business venture with marketing top talents is more likely to be a larger sized firm (r = .147), located in a dynamic industry (r = .075), and with a higher use of strategic alliance (r = .068). Large-sized firms are less likely to use strategic alliances (r = −.065) but are more likely to be older firms (r = .285). Firms located in a dynamic industry are more likely to be younger firms (r = −.084).

Regression Results

We used hierarchical regression analysis to test the hypotheses. The regression results are reported in Tables 3. As shown in Table 3, the hierarchical regression results for human and social capital of entrepreneur on EO were significant. As shown in the Full Model, the coefficients of an entrepreneur’s human and social capital variables on EO were both significant (b = 0.22, p < .001; b = 0.02, p < .05, respectively), which means that Hypotheses 1 and 2 are supported. Also, the results, as shown in Model 3 of the Full Model indicate that the coefficients of marketing top talents variables on EO are significant (b = 0.13, p < .01), but the coefficients of functional diversity of an entrepreneurial team on EO are not significant. This means that Hypothesis 3 is supported, but Hypothesis 4 is not supported.

Table 3.

Results of Hierarchical Regression Analysis of Entrepreneurial Team Characteristics on Entrepreneurial Orientation.

Variables	Full model				Subgroup model
Variables	Model1	Model2	Model3	Model4	Founders stay	Founders left
Intercept	3.30***	2.44***	3.26***	2.42***	2.42***	2.20***
Intercept	(0.07)	(0.16)	(0.08)	(0.16)	(0.17)	(0.51)
Firm age^a	0.00	0.01	0.01	0.01	0.01	0.08
Firm age^a	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.09)
Firm size^a	0.04*	0.05***	0.03+	0.04*	0.03+	0.07
Firm size^a	(0.02)	(0.02)	(0.02)	(0.02)	(0.02)	(0.04)
Industry dynamism	−0.09+	−0.08+	−0.10*	−0.10*	−0.09+	−0.08
Industry dynamism	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.14)
Alliance diversity	0.77***	0.70***	0.73***	0.66***	0.66***	0.65+
Alliance diversity	(0.11)	(0.11)	(0.11)	(0.11)	(0.12)	(0.36)
Founding status	0.02	0.02	0.02	0.02	0.03	0.03
Founding status	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)	(0.10)
Human capital		0.22***		0.22***	0.22***	0.13
Human capital		(0.04)		(0.04)	(0.04)	(0.12)
Social capital		0.02*		0.02+	0.02*	−0.01
Social capital		(0.01)		(0.01)	(0.01)	(0.03)
Functional diversity			0.04	0.03	0.01	0.61*
Functional diversity			(0.09)	(0.09)	(0.09)	(0.31)
Marketing top talents			0.13***	0.13***	0.11***	0.23**
Marketing top talents			(0.03)	(0.03)	(0.03)	(0.09)
F value	5.38***	7.29***	5.89***	7.56***	6.53***	3.41***
R²	.06	.09	.07	.10	.10	.33
Adjusted R²	.05	.08	.06	.09	.09	.23

Log-transformed value.

p < .10. *p < .05. **p < .01. ***p < .01.

We further examine the context of founder turnover. When we consider founder turnover context, the characteristics of an entrepreneurial team better explain the level of EO (R² = .33). When we compare EOs between groups of samples by founders staying (n = 1,078) and founders leaving (n = 150), the influences of an entrepreneur characteristics, such as human and social capital of an entrepreneur, are significant in the subgroup model of “funders stay” (b = 0.22, p < .001; b = 0.02, p < .10, respectively), but these entrepreneur characteristics are not significant for the subgroup model of “founders left.” In particular, the functional diversity of the entrepreneurial team is significant (b = 0.61, p < .05). This means that Hypothesis 4, the functional diversity of the entrepreneurial team influences EO, can be supported in the context of founder turnover. For all models, the variables of marketing top talents are all positive and consistently significant.

These findings may suggest that entrepreneurial team characteristics, such as the existence of marketing top talents and the functional diversity of entrepreneurial teams, are major drivers in forming and developing EO, particularly in the context of founder turnover. Overall, entrepreneurial team model generally explain how the level of EO is determined not by entrepreneur’s characteristics but by those of entrepreneurial team. However, when founder turnover context is considered, the characteristics of the entrepreneurial team has more explanatory power than the entrepreneur only model.

Discussion and Conclusion

Overview and Implications

In terms of research on entrepreneurship, studies on entrepreneurial teams have gained increasing recognition (Cooney, 2005; Schjoedt & Kraus, 2009; Schjoedt et al., 2013). Although there is limited consensus in defining an entrepreneurial team (Ben-Hafaïedh & Cooney, 2017), we need more information on how EO is created and developed through entrepreneurial processes (e.g., Cooper & Daily, 1997). It is evident that studies on entrepreneurial teams provide unique insights on how entrepreneurial teams create and develop shared engagement or commitment (Wales et al., 2011).

Relating to this, this study explores the role of the entrepreneurial team as a determinant of EO, in the context of Korean business ventures. The empirical assessment of the relationships from 1,228 Korean samples of business ventures have clearly shown that the level of EO is determined not only by the sole entrepreneur’s human and social capital but also by entrepreneurial team characteristics, such as the existence of top talents who have special skills in marketing. Although the entrepreneurial team’s functional diversity is not found to be consistent with previous research (Sciascia et al., 2006), additional subgroup analysis showed that the influence of functional diversity on EO is positive and significant when we consider the context of the founder’s turnover. This study also explores possible contingencies of founder turnover that helps us understand the contextual differences between the influences of entrepreneurial team characteristics on EO at the firm level (Yoon, 2012a). The results showed that the existence of marketing top talents in entrepreneurial teams positively and constantly enhance the level of EO.

These results may suggest the following implications. First, the results of this article generally support the previous conceptual model of EO, proposed by Covin and Slevin (1991) but criticized by Zahra (1993). Also, current results expand the previous model of Sciascia et al. (2006), which emphasize the role of (a) CEO, (b) dynamic environments, (c) alliance formation, and (d) marketing orientation. Likewise, this study has reported similar outcomes and generally supports the argument of Sciascia and her colleagues but also expands on the scope of the unidentified factors of an entrepreneurial team, providing a more realistic and detailed description for the determinants of EO.

Second, this article examines two sides of inputs on the entrepreneurial process, the entrepreneur and the entrepreneurial team. The former is of the entrepreneur’s human and social capital, and the latter is of the top talent skills potentially substitutable or compliment with those of the entrepreneur. In considering both inputs altogether, we hope to provide some new insight into the contemporary theory of entrepreneurship, in that EO can be shared outcomes rather than independent from the entrepreneurial process. This unique contribution may help scholars in the field of entrepreneurship to understand the important but unidentified side of determining effects on EO (De, Clercq, Dimov, & Thongpapanl, 2011, 2013; Sciascia et al., 2006).

Third, the results showed that the existence of top talents in an entrepreneurial team is favorable in forming EO. This means that the knowledge, commitment, and shared engagement of top talents in entrepreneurial teams may influence EO. Even scholars who emphasized upper echelon theory start to view entrepreneurship as an outcome of shared interactions among team members (e.g., Schjoedt & Kraus, 2009). Likewise, the current study suggests a complementary role of the top talents rather than a substitutable role for the founder in creating and developing EO. We hope these important but neglected aspects of interactions in an entrepreneurial team may provide a hint for scholars who have interests in team dynamics within an entrepreneurial team. Furthermore, the current paper provides an insight to examine the important factors of an entrepreneurial team to form the level of EO, and describes how these effects can be fortified in the context of founder turnover. In this paper, we clearly showed that the influences of entrepreneur and top talents of an entrepreneurial team on EO are relevant for the sample of founder turnover rather than other counterparts. These findings may contribute to existing research on entrepreneurial teams by suggesting that the level of EO can be developed by joint production of an entrepreneurial team, not just by the entrepreneur but also by the top talents in the entrepreneurial team.

To sum up the research results, analyzing 1,228 Korean samples of business ventures imply that EO of business ventures can be created and developed throughout entrepreneurial processes by the interaction of the entrepreneur and the top talents within an entrepreneurial team. As much of cultural aspects can be influenced by the human and social capital of the entrepreneur and the entrepreneurial team, the current study clearly states and highlights that top talents in marketing play an important role in creating and developing EO. These findings help scholars and practitioners who have special interests in the area of entrepreneurial teams.

Limitations and Future Research Directions

The purpose of this study was to identify the determinations of EO. For this, the current study considered the factors of entrepreneur and entrepreneurial team that had an impact on the level of EO. However, the study has several limitations. First, due to data limitations, we did not fully capture the influences of diversity in the entrepreneurial team on EO. We tried to use available information, but only had limited available information on entrepreneurial teams, such as functional background of the entrepreneurial team. We identified the positive and significant effect of functional diversity of an entrepreneurial team on EO, however, this is just true for the sample of founder turnover. Although functional diversities can be measured differently by the degree of formalization or diverse filed experience (e.g., Ben-Hafaïedh, 2017; Klotz et al., 2014; Schoss et al., 2017), a more deep-level diversity needs to be examined. As Schoss and her colleagues (2017) argued, when we consider the deep-level diversity, it will be fruitful to explored the different diversity effects of an entrepreneurial team on EO (e.g., Cloutier, Cuelle, & Recasens, 2017; Schoss et al., 2017). Although diversity is an important attribute of the members, the characteristics of the individual compositional diversity are usually considered in terms of heterogeneity or diversity. As Harrison and Klein (2007) argued, diversity is needed to be understood not just by the degree of unity but by the potential differences, which is not enough to conceptualize with the conventional measurement of diversity. We think the fault line approaches, better describe the coalition and dynamics within a team. Specifically, the fault line is necessary to better understand the nature and effects of the compositional diversity collective demarcation (Lau & Murnigan, 1998). Thus, for future research, it is recommended that researchers focus on diversity issues in entrepreneurial teams with respect to fault line approaches and measurements (e.g., Chung et al., 2015; Meyer & Glenz, 2013).

Second, we assumed that the contribution of a team member is not equal in formulating EO, and their diversity helps to develop EO. However, we did not consider the role balance of team members, as well as their team dynamics. More fruitful outcomes can be generated by considering the role balance among team members, which is equally valuable to the leading role of top talents in an entrepreneurial team (e.g., Belbin, 1981). Schjoedt and Kraus (2009) explicitly address the balancing role between heterogeneity and homogeneity in deep-level individual differences within entrepreneurial teams. A study examining the process of how power play among founder, entrepreneur and top talents creates or develops EO is still required to be conceptualized. Thus, future research is needed to consider the role balance of entrepreneurial teams. For example, studies have explored the effects of vision in an entrepreneurial team (e.g., Preller et al., 2016) or communication and coordination (e.g., Mueller & Gemünden, 2009). Also, by considering entrepreneurial team dynamics between the entrepreneur and members of the entrepreneurial team that create conflict and trust within entrepreneurial team (e.g., Khan, Breitenecker, Gustafsson, & Schwarz, 2015; Khan, Breitenecker, & Schwarz, 2015; Monsen & Boss, 2009), we will understand how EO can be created and changed in the entrepreneurial process.

Finally, we paid limited attention to some important antecedents and contingency factors, which determine the level of EO. For example, with data limitations, we could not measure the entrepreneur’s cognitive, structural, and relational dimension of social capital (Adler & Kown, 2002; Kwon & Adler, 2014). Although the idea and measurement of social capital was suggested by Lin, (1998, 1999) a more diverse dimension of social capital needs to be explored (e.g., Davidsson & Honing, 2013). With an entrepreneur’s human capital, we also need to consider whether they are serial entrepreneurs, encouraging the development of a more genuine meaning of human capital of an entrepreneur (MacMillan, 1986; Ucbasaran, Westhead, Wright, & Binks, 2006; Westhead & Wright, 1998). Although we consider the contingency effect of founder turnover, team dynamics between the entrepreneur and members of the entrepreneurial team are not carefully considered (Mueller & Gemünden, 2009). For example, it is necessary to identify the effects of team members’ turnover, such as that of the top talents, as well as that of the founder. EO can be developed through interaction of team members, and teamwork in turn influences the development of EO. Thus, in a subsequent study, it is fruitful to consider the new member addition or change in entrepreneurial team (e.g., Chandler et al., 2005; Forbes, Borchert, Zellmer-Bruhn, & Sapienza, 2006). This may allow us to better understand the determinants of EO.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research,authorship,and/or publication of this article.

Funding

The author(s) received no financial support for the research,authorship,and/or publication of this article.

ORCID iD

Hyunjoong Yoon

Author Biography

Hyunjoong Yoon is an assistant professor at the College of Business Administration,Kangwon National University,South Korea. He received his PhD from Seoul National University and MBA from Lundquist College of Business at the University of Oregon. His current research interests include entrepreneurial orientation,entrepreneurial teams,governance,and strategic human resources management.

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Exploring the Role of Entrepreneurial Team Characteristics on Entrepreneurial Orientation

Abstract

Keywords

Introduction

Research Background

Previous Research on Entrepreneurial Team

Previous Research on the Determinants of EO

What we Need to Know in Practice

Research Questions and Focus

Hypotheses Development

The Influence of Entrepreneur’s Human Capital

The Influence of the Entrepreneur’s Social Capital

The Influence of Top Talents in an Entrepreneurial Team

The Influence of Functional Diversity in an Entrepreneurial Team

Method

Data and Sample

Measurements

Dependent variable

Independent variables

Human capital of entrepreneur

Social capital of entrepreneur

Marketing top talents in the entrepreneurial team

Functional diversity of the entrepreneurial team

Control variables

Model Specification

Results

Descriptive Statistics

Regression Results

Discussion and Conclusion

Overview and Implications

Limitations and Future Research Directions

Footnotes

Declaration of Conflicting Interests

Funding

ORCID iD

Author Biography

References