Entrepreneurial teams: passion, not greed, breeds success
Based on an interview with Jonas Debrulle and Johan Maes of IÉSEG School of Management, Lille, on their paper, “New ventures: how team motivation affects financial outcomes” (The Journal of Business Strategy, 2020) co-written with Elliroma Gardiner (QUT & IÉSEG).
When forming a startup, a lot hinges on the vision and business acumen of the founding team…and on the motivation of its members. Indeed, new research has revealed that founding a business because of passion leads to greater financial success than founding a business with the aim to make money.
We are living in the age of the startup. According to CB Insights, there are over 450 unicorns – privately held startup companies valued at over $1 billion, as of October 2020. Ample evidence shows that founding teams – for rarely is a new venture the brainchild of a lone wolf – and how they devise and execute their vision ultimately determines the success or failure of the venture. But research so far hasn’t examined how motivation among founding team members impacts the success of new businesses. Jonas Debrulle, Johan Maes and Elliroma Gardiner explored how different motivations among team members interact within a fledgling business. “What if one is starting the business because they are looking for the rewards that might come with entrepreneurship, and another is looking at starting a business because they genuinely love being a business owner” explained Debrulle.
Push and pull
There is already an existing field of research exploring the idea of “push” and “pull” entrepreneurship. “Push” here refers to necessity, not being able to find a job, or having no other option; while “pull” entrepreneurship exists when you have a job but give it up because becoming an entrepreneur is a lifelong dream. “That says something about why you started but it doesn’t say anything about why you do what you do while you’re being an entrepreneur and what decisions you take along the way when the business is already up and running,” says Debrulle.
Self-determination theory (SDT) suggests that there are two key ways one can be motivated, you can be motivated because you genuinely love doing something, autonomous motivation, or because you are looking for a reward, controlled motivation. Of course, in reality individuals can be influenced by both of these factors at the same time, but one tends to be dominant. Recognising this fact is a break from the push and pull theory of entrepreneurship, that implies a person is one or the other. Taking this into account in the context of teams of founders was a key challenge for the researchers.
Different motives within a team
But what if different team members have different types of motivation when founding a company? That was the core question the researchers set out to answer. This was done by analysing differences in self-reported motivation of team members (as well as the variation herein) and the impact of team motivation on the financial performance of the business. The latter was measured by assessing return on assets over two years alongside the innovation success of the firm.
The team predicted that both types of motivation would be beneficial in financial terms but that autonomous motivation would foster greater innovation success and controlled motivation would negatively impact innovation. They also expected that teams with conflicting sources of motivation would have to spend more time finding compromises and thus would be less effective in financial terms but more successful in their innovation.
The results of the research showed that autonomous motivation among founders led to increased financial success while controlled motivation led to decreased innovation performance. The rest of the results didn’t reach statistical significance but the researchers believe this doesn’t necessarily mean that the patterns they predicted don’t exist. “Maybe the reason why we’re not seeing an effect of autonomous motivation on innovation, like we predicted, is because our timeframe for measuring innovation might have been too short,” Maes explained. It’s very possible that true innovation takes time and the study simply wasn’t long enough to detect measurable changes in innovation levels. It’s also likely that innovation itself is very difficult to quantify and the study simply wasn’t able to measure any changes in innovation that were present.
The researchers were however surprised to learn that there was no statistical effect resulting from the level of diversity of motivation between team members. Perhaps there are benefits of diverse motivation types as well as disadvantages and these tend to cancel each other out, or the sample may have been too small to detect any change. The researchers will be conducting further research to get to the bottom of this question.
This research is of value to entrepreneurs who are forming teams in their new business and are interested in understanding how diverse members best fit together to impact outcomes.
The authors surveyed the founding teams of 66 ventures representing 142 founders. Face-to-face interviewing was used to acquire detailed information regarding their educational background, career trajectory and entrepreneurship motives.