Hypotheses Development

The created model includes four latent variables that are measured with 31 items (for a detailed explanation see section 4.1.4). These are Team Diversity, Network, Finance, and Performance. SEM and especially the PLS method is used and there-fore the paths between the variables represent the hypotheses in the model. It is assumed that the variables Network and Finance are mediators for the effect of Team Diversity on Performance. The model is shown in Fig. 4.3.

To distinguish easily between direct and indirect effects the paths in Figure 4.3 are labeled with small latters (a, b, c, d, e, and f). The direct effects in the model are captured by hypotheses one to six respectively path a, b, c, d, e, and f. The indirect

50 Chapter 4. Specific Success Factors

Figure 4.3. Structural Model and Hypotheses

effects can be analyzed by the hypotheses 7 and 8 or a*b and c*d. As introduced in section 4.1.2 there exist a controversial debate about the effectiveness of homo- or heterogeneous teams. Based upon oppositional findings and the two diametrically opposed theories of Byrne (1971) and Horwitz (2005) concerning team composition, the direct effect of team Composition on performance is expected to be zero. This assumption is picked up by hypothesis 1.

Hypothesis 1: Team diversity has no impact on firm performance.

Due to the network success hypothesis and social capital theory (Granovetter (1973), Brüderl and Preisendörfer (1998)) and the fact that networks (informal and formal networks) serve to embrace entrepreneurial opportunities (Baron and Tang (2009), Baron (2006), Ozgen and Baron (2007)) the firm’s network is adressed as one of the most important success factors for new venture firms. Shane and Stuart (2002) e.g. postulated that direct and indirect contacts of the founding team with ven-ture capitalists in their social network reduce the likelihood of failure. Furthermore, Grandi and Grimaldi (2003) show that the frequency of interaction with externals before founding the firm has an impact on the new venture’s network and interac-tion frequency that boosts firm performance. Another reason why the firm’s network serves as a major success factor is that the effect of social capital could be more im-portant than teamwork capabilities (Brinckmann and Hoegl (2011)) and enhances performance (Vissa and Chacar (2009), Balkundi and Harrison (2006), Walter et al.

4.1. Does Team Diversity Really Matter? 51

(2006)). Regarding the relevance of network ties and social capital in the mediation model it is applied that team diversity has a strong impact on the firm’s network and in turn the firm’s network has an impact on the access to resources and firm performance. Path a, respectively hypothesis 2 captures the impact of Team Diver-sity on the firm’s network. It can be assumed that team diverDiver-sity leads to a more diversified and greater network (e.g. Reagan et al. (2004), Burt (1992), Granovetter (1973)).

Hypothesis 2: A heterogeneous team composition has a positive impact on the firm’s network.

Hypothesis 3 respectively path b involves the impact of the firm’s network on per-formance. A higher degree of different external networks that are less overlapping should provide more unique information inflows (e.g. Granovetter (1973), Reagan et al. (2004)) and lead to a larger pool of external adivsers, and more innovation (e.g.

Hambrick (1994), Hansen (1999), Alexiev et al. (2010)) that in turn could lead to higher performance of the firm. As a whole, Vissa and Chacar (2009), Balkundi and Harrison (2006) and Walter et al. (2006) argue that a greater and more diversified network should permit more business activities and therefore enhances the firm’s performance that lead to:

Hypothesis 3: The firm’s network has a positive impact on performance.

A positive impact of network ties on the access to financial resources is stated by e.g.

Jarillo (1989), Birley (1986), and Starr and MacMillan (1990)). In a more recent critical review of networks in entrepreneurship literature Hoang and Antoncic (2003) show that a developed network could be an advantage for spin-offs or new venture firms to get access to financial resources. Furthermore, Brüderl and Preisendörfer (1998) and Zhao and Aram (1995) show as well that network ties could enhance

52 Chapter 4. Specific Success Factors

the access to financial resources. That leads to the hypothesis that the access to financial resources can be pushed by network ties:

Hypothesis 4: The firm’s network has a positive impact on financial re-sources.

As regards to the resource-based view (Wernerfelt (1984)), the financial resources of new venture firms constitute the most CSF, whereby the firm’s ability to attract financial resources is fundamental. H5 captures this effect:

Hypothesis 5: Financial resources have a positive impact on firm perfor-mance.

Corresponding to the pecking-order theory (Myers and Majluf (1984)), venture cap-italists tend to invest in university spin-offs after the seed stage, and entrepreneurs prefer internal funding instead of external resources (Roberts (1991)). However, the financing of new ventures with venture capital is seen as the most important funding source for high-tech-based firms (Wright et al. (2006)). The literature on venture capitalism investigates how start-ups have to be evaluated and which evalu-ation criteria must be fulfilled to attain venture capital. One of the most important evaluation criteria concerns the entrepreneurial team (e.g. Silva (2004)). The most frequently mentioned team characteristics are industry experience, leadership expe-rience, managerial skills, and engineering/technological skills that attract venture capital (Franke et al. (2008)). Human capital can serve as a signaling effect and therefore heterogeneous teams are preferred because of their functional diversity (Franke et al. (2008)). These findings lead to hypothesis H6:

Hypothesis 6: A heterogeneous team composition has a positive impact on financial resources.

4.1. Does Team Diversity Really Matter? 53

As highlighted in section 4.1.2 many scholars from strategic management ignore possible mediating mechanisms that could explain the impact of team diversity on performance. As usual in organizational behavior research concerning team diversity and performance a mediation model is built that is able to investigate direct and indirect effects. It is supposed that the direct effect of team composition on firm performance is mediated by the firm’s network and financial resources. In other words, team diversity affects the firm’s network and the firm’s financial resources that in turn affect the firm’s performance. These indirect effects are captured by hypotheses 7 (a*b) and 8 (c*d).

Hypothesis 7: The direct effect of team diversity on firm performance is mediated by the firm’s network.

Hypothesis 8: The direct effect of team diversity on firm performance is mediated by the firm’s financial resources.