Can cognitive biases explain venture team homophily?
Article first published online: 30 MAR 2009
© 2009 Strategic Management Society. Published by John Wiley & Sons, Ltd.
Strategic Entrepreneurship Journal
Volume 3, Issue 1, pages 67–83, March 2009
How to Cite
Parker, S. C. (2009), Can cognitive biases explain venture team homophily?. Strat.Entrepreneurship J., 3: 67–83. doi: 10.1002/sej.55
- Issue published online: 30 MAR 2009
- Article first published online: 30 MAR 2009
- self-serving bias;
- venture teams;
Although venture teams whose founders are dissimilar (heterophilious) tend to outperform teams whose founders are similar (homophilious), most new venture teams are characterized by homophily. I try to explain this puzzle with a learning model in which founders are prone to two cognitive biases: overoptimism and self-serving attributions. Founders choose cofounders with similar beliefs as themselves because they expect this to promote the most effective allocation of effort to the venture. Self-serving bias reinforces and perpetuates these beliefs. In principle, informed outsiders (e.g., practitioners or hands on investors) can improve venture team composition compared with private choices by founders. Copyright © 2009 Strategic Management Society.