Founding Process Pathways: The Contingent Fit Between Team Formation and Entrepreneurial Strategy

Entrepreneurs often search for both business ideas and potential cofounders at the same time, and these two processes can influence each other. Founding teams can form through either a gradual process of cofounder additions—which we label a sequential team formation process—or cofounders can join forces in a single event, which we label a simultaneous team formation process. In this empirical study of entrepreneurial team formation and strategy formation, we propose a contingency theory that distinguishes between two pathways: an instrumental pathway, which includes a sequential team formation process, a high technology business idea, and a flexible approach to strategy formation, and a serendipitous pathway, which includes a simultaneous team formation process, a low technology business idea, and an inflexible approach to strategy formation. Using alumni survey data, we find that elements of the instrumental pathway are mutually complementary: compared with simultaneous team formation, sequential team formation is associated with a larger founding team size and better long-run venture outcomes for high-tech ventures with flexible strategies. The results suggest that the way in which a founding team is formed and the approach to strategy formation can have significant and interdependent implications for the success of a venture.