A contextual examination of new venture performance: entrepreneur leadership behavior, top management team heterogeneity, and environmental dynamism

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Abstract

This study examined the relationship of entrepreneur leadership behavior (empowering and directive), top management team heterogeneity (functional, educational specialty, educational level, and skill) and industry environmental dynamism (rate of unpredicted change in number of industry establishments, number of industry employees, industry revenue, and industry research and development intensity) on new venture performance (revenue growth and employment growth) using two different samples—the Inc. 500 list of America's fastest growing startups and a national (United States) random sample of new ventures. In dynamic industry environments, startups with heterogeneous top management teams were found to perform best when led by directive leaders and those with homogenous top management teams performed best when led by empowering leaders. Conversely in stable industry environments, startups with heterogeneous top management teams were found to perform best when led by empowering leaders and those with homogenous top management teams performed best when led by directive leaders. These findings were consistent across both samples and demonstrate the value in a contextual approach to leadership, which considers adjusting leadership behavior in accordance to factors that are both internal and external to the firm. Copyright © 2007 John Wiley & Sons, Ltd.

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