Unlocking the Potential of Family Relationships in Entrepreneurship

By Eliana Chow

It may seem cliché when business teams describe themselves as a family, but new research by NC State University’s Jeffrey Pollack shows that family-like relationships can actually help increase productivity in early-stage entrepreneurial ventures, especially when there are age and gender differences that might otherwise slow initial growth.

“Our goal with this paper is to help new entrepreneurs build teams from the ground up, with an emphasis on welcoming diversity of thought alongside setting mutual goals and clear expectations for team members,” says Pollack, a professor of entrepreneurship at the Poole College of Management.

To complete their study, Pollack and his co-authors — Eun-Jeong Ko from Farleigh Dickinson University and Johan Wiklund from Syracuse University — analyzed data from the Panel Study of Entrepreneurial Dynamics (PSED), a research program that collected multiple years of data on newly formed and early-stage ventures. From the PSED database, 285 teams reported a sufficient amount of demographic information, including age, gender, team size and productivity, to be included in the project.

The research team found that new teams with age and gender differences took longer to achieve their initial goals than teams with more similar members. The authors suggest this was due to the additional time required for age- and gender-diverse teams to build community and develop efficient methods of working together. “When you first join a team and start something new, having common ground, whether that is age, gender or ethnic background, helps generate productivity earlier in the entrepreneurial process,” Pollack explains. The researchers initially expected age, gender and ethnic differences to impact productivity, but in their results, they noted that ethnic diversity did not hinder team productivity as much as age and gender.

To counteract the effects of diversity on productivity in new ventures, the researchers theorized that pre-existing family relationships within a team, like in a new family-owned business, might significantly decrease the negative impact of age and gender discrepancies on early productivity. When teams fully or partially consisted of close family relationships, roles within the venture were more clearly defined. Each member was affirmed in their value as an individual, bringing their unique gender identity, age, life experience and perspective to the venture. But they also looked out for the good of the team, moving together toward common goals and promoting unity within diversity.

Mimicking these family relationship dynamics is pivotal when laying the groundwork for new entrepreneurial teams, Pollack and his co-authors suggest. As new teams incorporate professional development training and organize timelines for their venture’s progress, they should clearly articulate both the overarching goals for the team and the personalized expectations for each member. These action steps will help ensure teams are united around a shared vision while remaining attentive and open to one another’s niche expertise and perspectives. Adopting these two values in tandem will maximize productivity as the new venture grows.

“Diversity is important,” Pollack affirms. “But teams also need unity to help drive productivity. By pairing these convictions with a deeper understanding of our unique business contexts, we can unlock the full potential of diverse teams, foster stronger relationships between members and launch successful ventures that make our communities a more welcoming place for all.”

The paper, “Entrepreneurial Team Diversity and Productivity: The Role of Family Relationships in Nascent Ventures,” is published in Entrepreneurial Theory and Practice. The paper was co-authored by Eun-Jeong Ko of Farleigh Dickinson University; Johan Wiklund of Syracuse University; and Jeffrey Pollack of North Carolina State University.

—

Note to Editors: The study abstract follows.

“Entrepreneurial Team Diversity and Productivity: The Role of Family Relationships in Nascent Ventures”

Authors: Eun-Jeong Ko, Farleigh Dickinson University; Johan Wilund, Syracuse University; and Jeffrey M. Pollack, North Carolina State University

Published: March 12, 2020, Entrepreneurial Theory and Practice

DOI: 10.1177/1042258720902058

Abstract: In this study, we examine how team diversity contributes to team productivity in nascent ventures depending on family relations. Specifically, we explore how bio-demographic diversity influences team productivity using data from a panel of 285 nascent venture teams over 5 years. Results suggest that age and gender diversity have negative impacts on team productivity, but that family relationships positively moderate these effects. To explain the phenomena, we relied on social identity theory and the discussion of the identity confirmation process. Through this novel theoretical framework, we describe how identity confirmation, through identification with a collective (i.e., family), and cross-categorization of family roles mitigate the negative impact of bio-demographic diversity. Our findings provide valuable insights to scholars interested in bio-demographic team diversity, family relationships, and the new venture creation process.

This post was originally published in Poole Thought Leadership.