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2022

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06

[Paper Express] A Study on the Impact of the Consistency of the Dominant Needs of Founders and Partners on Entrepreneurial Performance Based on Response Surface Analysis


Abstract:Existing studies have pointed out that the characteristics of the CEO and other top management team members have an important impact on corporate performance. However, the research on the interaction between the two effects on enterprise performance is relatively rare, especially in the context of entrepreneurship. Therefore, based on higher-order theory and interpersonal interaction theory, through polynomial regression and response surface analysis, the influence of the degree of matching of the dominant needs of the founders and partners of start-ups on the quality of their leader-member exchange and enterprise performance is explored. Through the statistical analysis of 600 executive data of 163 start-ups, it is found that although the dominant needs of founders and partners of start-ups are positively correlated with the quality of their leader-member exchange and enterprise performance, when the two dominant needs are consistent, the quality of leader-member exchange and enterprise performance are the lowest. In addition, when the two dominant needs are consistent and low, and when the founder rather than the partner's dominant needs are high, the quality of leader-member exchange and enterprise performance are lower.

 

Key words:Founder; Entrepreneurial Team; Dominant Demand; Leader-Member Exchange Quality; Firm Performance;

 

Abstract: First, extant research has claimed the significance of both chief executive officers(CEOs)' and top management teams(TMTs)' traits in firm performance. Compared to TMTs in large sized companies with established management policies, TMTs in start-ups have a stronger influence on firm performance. Also, in responding to the call for more research on studying the traits of TMTs that are relevant to entrepreneurship, our study explores the relationship between entrepreneurial team's dominant needs and firm performance. Entrepreneurs need to direct their subordinates and control their environment(i.e., dominant needs) to manage their startups. Second, the CEO-TMT interface perspective has claimed the need to distinguish CEO and TMT in understanding the relationship between their traits and firm performance. However, less attention has been paid to investigating such differences, especially by testing the congruence effects of deep-level traits(e.g., personality, value, and need) in CEOs and TMTs. Third, while the current literature has tested the positive influence of trait congruence, its negative influence has yet to be examined. However, interpersonal interaction theory has stated that complementary rather than substituted traits can bring more positive effects when the traits are control-oriented. As such, by integrating upper-echelons theory and interpersonal interaction theory, our study explores the congruence effects of founders' and other TMT members' dominant needs in start-ups on their leader-member exchange quality and firm performance. Based on data of 600 top managers from 163 startups(i.e., 163 founds matched with 437 TMT members) and using a polynomial regression, the empirical findings supported that the dominant needs of both the founder and other TMT members in start-ups have positive implications for leader-member exchange(LMX) and firm performance. However, the lowest LMX and firm performance correspond to both the founder and TMTs having high dominant needs. In addition, when both the founder and other TMT members have lower rather than higher dominant needs as well as when the founder rather than other TMT members has higher dominant needs, LMX and firm performance are lower.Our study makes three contributions to the literature on entrepreneurship and the theory of upper echelons. First,we enrich the understanding of how top managers' traits affect firm performance, which is one key topic in upper echelons theory. Extant research has found that similarities in the traits of CEOs and TMTs have positive implications for firm performance. Drawing on interpersonal interaction theory, our findings suggest that upper echelons theory should differentiate the traits into two categories: control and affiliation. When the traits are control-oriented, congruence in such traits may lead to negative outcomes. Second, our study extends the entrepreneurship literature by examining the congruence effects of CEOs' and other TMT members' deep-level traits. Scholars have examined the interaction between CEOs' and TMTs' traits in the strategy literature. However, such interactions are not thoroughly examined in the context of entrepreneurship research. Moreover, we introduce an investigation of dominant needs in the entrepreneurship literature. Dominant needs are closely relevant to strategic decisions in start-ups. Research on such traits thus responds to the call for more research on the entrepreneurship-related traits of top managers. Third, our study contributes to the leadership literature. Our examination of the mediating effect of LMX adds to studies on collective LMX, especially in the entrepreneurship literature. Also, empirical findings suggest that extraversion, a trait similar to dominant needs, is positively related to leader effectiveness and team performance. However, our study found that dominant needs can have negative effects under certain conditions, providing insights into our understanding of leader traits.

 

Key words: Builder; entrepreneurial team; dominant needs; LMX; firm performance;

 

Author: WANG Ying, WEI Feng

Author: School of Management and Economics, Beijing Institute of Technology

School of Economics and Management, Tongji University

The full text has been published in Science and Science and Technology Management, Issue 1, 2022.

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