While it appears quite clear that start-up team characteristics play a vital role in the ultimate success or failure of an entrepreneurial business venture, we still know little about the dynamics associated with entrepreneurial team composition and development. Most entrepreneurial teams consist of friends, relatives and/or associates from former employers or educational institutions, which would indicate that a) they emerge from existing relationships, often without consideration of members’ capabilities to successfully launch a new business and b) the team members are selected based on common interests and not on the unique functional diversity added by each team member. Therefore functional diversity is either developed by existing team members or it is acquired by hiring from outside. Three different conceptualisations of functional diversity [1] have been defined as:

  • dominant functional diversity – diversity in different functional areas within which team members have spent the greater part of their careers
  • functional background diversity – diversity in the complex functional backgrounds of team members
  • functional assignment diversity – diversity in team member functional assignments

Teams composed of functionally broad individuals will be better at sharing information than teams composed of functional specialists, which has significant implications for team process and performance. Team members that do not contribute unique functional diversity tend to drop out of the team within the first few years. As a result individual team member’s team tenure can cause considerable upheaval in the early years of the venture.

1. Bunderson, J. S. and Sutcliffe, K.M.  (2002). Comparing Alternative Conceptualizations of Functional Diversity in Management Teams: Process and Performance Effects, Academy of Management Journal, 45, (5) pp 875-893.