The Temporal Dynamics of Firm Emergence by Team Composition: Examining Top-Performing Solo, Family, and Team-Based Startups

IntroductionFirm emergence is the "the temporal sequence of events or activities that occur as entrepreneurs create a new business" (Liao & Welsch, 2008) and includes the types of venture creation actions that all nascent entrepreneurs initiate in attempting to launch a firm, such as: obtaining resources, developing new products, seeking funding, and making sales. Yet, the temporal dynamics of firms during this gestation period are not well understood. Some scholars have argued that firms emerge through a relatively sequential series of somewhat predictable phases (Churchill & Lewis, 1983; Galbraith, 1982; Gartner & Starr, 1993). An alternative perspective argues that the gestation period is a disorganized assortment of startup activities (Korunka, Frank, Lueger, & Mugler, 2003; Liao, Welsch & Tan, 2005) and point to the relative insignificance of startup activity timing (Carroll & Hannan, 2000). As a result, some scholars judge the completion of a series of startup activities a useful method by which to evaluate whether firms are emerging (e.g. Block & MacMillan, 1985; Carter, Gartner, & Reynolds, 1996; Manolova, Edelman, Brush & Rotefoss, 2012). Yet, the point at which a series of startup activities results in the creation of a new firm can be difficult to determine (Reynolds & Miller, 1992). As a result, in our study, we adopt the view that advocates for quantifying the achievement of a succession of startup activities as the method by which to gauge firm emergence. The type of enterprise may also have bearing on firms' emergent growth and trajectory, as the dynamics at play within firms started by individual entrepreneurs may impact firm emergence differently than within those firms started by a plurality of founders. Similarly, startups founded by teams composed of non-family members may emerge in a different manner than those started within families. Our overall interest lies in developing a better understanding of the temporal dynamics of firm emergence during the gestation period, and to help identify what is unique about those new firms with a substantial growth trajectory.In this study, we examine the growth and variation in firm emergence by enterprise type. In this investigation we are led by the research question: Do startups differ in their venture creation process in terms of the levels of firm emergence (i.e. the number of startup activities completed) and in the temporal variation of the emergent change trajectory based on peer group association? To explore this issue, we develop hypotheses for the following sequence of investigative questions that examine the levels of firm emergence over time, the temporal variation of the emergent change trajectory, and determine if the firm emergent change differs for groups of firms.To test our hypotheses, we develop longitudinal models that probe the dynamics of emergence by examining firms' successive measurements during the gestation period using a sample drawn from the Panel Study of Entrepreneurial Dynamics II (PSED II), a database of US-based individuals in various stages of starting a firm.Our study helps to contribute to an increasing scholarly interest in research that lies at the nexus of entrepreneurship and family business in pertinent and significant ways. An understanding of entrepreneurial teams has grown in the past several years, yet the literature on entrepreneurial teams comprised of family members is limited. In addition, relative to their importance, there is scant information that compares the firm gestation process of nascent solo entrepreneurs, with that of non-family and family business startup teams. We focus on the completion of a series of startup activities by modeling the temporal dynamics of nascent firms to provide insight into how startups emerge over time, and to allow researchers to better develop well-informed questions for subsequent study. Therefore, our study also contributes to understanding of the gestation period, a critical phase in the startup process. …