How Do Family Founders Help Novice Entrepreneurs to Develop their Firms?

Abstract

Family businesses are typically characterized by the presence of co-founders of the same family at the start of the businesses, which helps keep ownership within the family. We studied 1000 randomly selected U.K. novice entrepreneurs and compared effects of initial co-founding team composition on entrepreneurial outcomes 10 years later. We find that, unlike non-family co-founders, family co-founders in the first company do not increase the possibility of novice entrepreneurs becoming habitual (either serial or portfolio) entrepreneurs in their early entrepreneurial careers. Although family co-founders have less entrepreneurial experience, as evidenced in our data and consistent with the resource-based view, family co-founders contribute significantly to the birth of high-growth entrepreneurs, in the same magnitude as non-family co-founders do. The findings show that both family and non-family co-founders help finance novice entrepreneurs’ activities through equity contribution, while lowering their leverage.