Innovation and Effectiveness of Co-Founded Ventures: A Process Model

Purpose We propose a process model relating innovative climates to effectiveness in co-founded ventures. Specifically, we argue that co-founders’ inputs relate to venture effectiveness via processes of team member exchange (TMX), team learning, and collective efficacy. Design/Methodology/Approach To study a population that is difficult to access, we use a computerized simulation in which 202 individuals act as new venture co-founders. Findings Results of our research support the hypothesized input-process-outcome model such that the intra-team processes of TMX, team learning, and collective efficacy fully mediate the relationship between the input of co-founding team climate for innovation and the outcome of co-founded venture effectiveness. Implications This study advances theory regarding processes that link team climates for innovation to collective outcomes. While we focus on this relationship in co-founded ventures, our findings have implications for team-level innovation research by clarifying how innovation relates to effectiveness. Beyond advancing theory, knowledge of this relationship may be of benefit to practice by identifying mediating mechanisms that can be reinforced in training and used as indicators of venture success by potential investors. Further, we contribute to the understanding of an important but understudied population of co-founded ventures and answer calls to utilize simulations to address team-based organizational questions. Originality/Value Our study answers calls to both clarify the processes that relate innovative climates to business outcomes and utilize computer simulations in organizational research while also addressing an important population of co-founded ventures that lacks a significant body of research.