What Hinders & Supports the Formation & Upholding of Gender Diverse Teams?: An Exploratory Case Study Researching New Venture Teams in a Swedish Incubator

(1)

Master Thesis in Business Administration, 30 credits Business Development and Internationalization, 30 credits

Spring term 2021

What Hinders & Supports the Formation & Upholding

of Gender Diverse Teams?

An Exploratory Case Study Researching New Venture Teams in a Swedish

Incubator

Authors: Erica Damsten & Lee Hasselgren

(2)

[THIS PAGE LEFT BLANK INTENTIONALLY]

(3)

ABSTRACT

The entrepreneurial team plays a crucial part in the new venture’s growth and success.

This notion is present among many investors as they often choose to bet on the “jockey”

(i.e. the team) instead of on the “horse” (i.e. the idea). Previous research has pointed to how diverse teams are better equipped to handle the complex practices a new venture is faced with, compared to homogeneous teams. The entrepreneurial environment has a prevalent gender inequality that hinders many women from entering and contributing to the industry. The purpose of this research was therefore to investigate what hinders and supports the formation and upholding of gender diverse teams. The study was written on commission for a Swedish incubator which led to an approach exploring how an incubator can influence and contribute to establishing these teams. Based on a literature review, the study chose an explorative and qualitative approach to answer the research questions as it was found that this area was relatively unexplored and contained little research on how to form and uphold gender diverse teams, especially in the Swedish incubator context.

Data was collected through conducting semi-structured interviews with three different types of samples. These were the commissioner (i.e. the incubator team), incubatees (i.e.

new venture teams of different compositions), and a few external actors within the Swedish incubator environment.

The findings pointed to that there are several more obstacles towards forming and upholding gender diverse teams than factors supporting it. More obstacles were found in terms of forming these teams and they related to entrepreneurs experiencing a lack of knowledge on how to find the right members with complementary skills. Contextual factors also affect the possibility to adopt an appropriate strategy to find team members.

An inherent fear of bringing in someone new was also present among entrepreneurs.

There is an absence of female role models which increases the difficulty and gap between men and women as the step becomes even larger for women to enter and succeed in the entrepreneurial environment. In terms of upholding gender diverse teams, conflict due to experienced personal differences and more challenging communication is common and can negatively affect the venture if not managed properly. Gender roles and stereotypes also have a negative impact. On the other hand, some supportive measures were also identified. In regards to team formation, resource seeking was a better option than interpersonal relationships when it came to forming a gender diverse team. Additionally, the increased demand for diversity among several actors like state agencies, incubators, and investors further pushes new ventures to form gender diverse teams. Among the incubatees, a shared outlook of wanting greater diversity and recognizing what it contributes with, shared motives, values, and expectations further supported the upholding of gender diverse teams. Other supportive measures were creating ownership directives and shareholder agreements as well as having complementary competencies, good communication, cohesion, and cognition. Further supportive measures an incubator can adopt related to strategy, networks, and placing initial demands on new ventures.

Keywords: Gender Diversity, Team Formation, Team Upholding, New Venture Teams, Incubator, Entrepreneurship

(4)

(5)

ACKNOWLEDGEMENTS

We would like to give a huge thank you to the incubator who has acted as a great contribution to this study. The incubator’s cooperation has provided us with valuable insights and knowledge that have proven to be imperative for our study. To the venture teams that also participated in this research, we would like to thank you for sharing their

experiences and being very open and honest as this greatly facilitated the answering of our research questions. We would also like to give a special thank you to the external actors who partook in this study and provided their imperative knowledge which made

us fulfill the purpose of this research.

We would like to thank our supervisor Maria Bengtsson for her knowledge and support during the writing of this thesis. Her advice has been very useful throughout the

completion of this research.

May 4th, 2021

Umeå School of Business, Economics, and Statistics Umeå University

Erica Damsten Lee Hasselgren

(6)

(7)

1. INTRODUCTION

The introductory chapter begins with a presentation of the chosen research subject. After this, the problem background is introduced. This is followed by a deeper dive into explaining the role of gender diversity in entrepreneurial teams. Thereafter, the purpose of the thesis and its research questions are presented. Next, the expected results are clarified. Consequently, a discussion regarding the study’s delimitations is pointed out.

A display of the thesis’ key definitions ends the introductory chapter.

1.1 Choice of Subject

This thesis highlights gender inequality in the entrepreneurial environment and especially in team formation among startups. This topic was mainly chosen because the thesis is written on commission for a Swedish incubator, but also due to the researchers’

significant interest in shedding light on the topic of gender equality in their field of study, i.e. business development. The authors have previously written a thesis touching upon the gender equality subject within entrepreneurship (Damsten & Hasselgren, 2020). That study focused on the challenges and opportunities for working towards increasing gender equality in this environment, where it was established that women are the subject of gender discrimination (Damsten & Hasselgren, 2020, p. 77). Hence, for there to be a gender-equal environment the work needs to start with enabling women to have the same base for starting their company as men, which is not the case. As the results concluded that women do not have the same opportunities in regards to networks, representation in teams, boardrooms, etc. (Damsten & Hasselgren, 2020, p. 77), the authors found the next research topic which was to tackle the unequal issue through investigating the obstacles and supports of creating gender diverse new venture teams. This approach will be more centered around including women in these teams and what they actually can contribute with, as well as the overall impact a more gender diverse team can have on a venture. The reason for this rests on the underrepresentation of women due to several factors which hinder their participation. The main findings of the authors’ previous study concluded that patriarchal structures, gender stereotypes, gender discrimination, and ignorance of inequality issues in the Swedish entrepreneurial environment were critical factors that do not foster gender-equal conditions (Damsten & Hasselgren, 2020, p. 77). A new finding also developed through analyzing the results which resulted in the difficulty of knowing whether people share an equal outlook or not, further complicating establishing knowledge and awareness about these issues (Damsten & Hasselgren, 2020, p. 77).

Consequently, since it was found hard to create a proper understanding of the subject, the authors felt the need to further add to this literature.

Other authors highlight how women entrepreneurs face several disadvantages compared to their male counterparts (Malmström et al., 2017b, n.a.), this further complicates their efforts in developing a new venture team (Almi Invest, 2020a; Olsson Jeffrey, 2020).

Interestingly enough, there is evidence that shows that gender diverse teams not only are more successful, they also display a greater amount of innovation performance (Ruiz- Jiménez et al. 2016, p. 510). This made the researchers think of what it takes to change the situation, which resulted in finding a knowledge gap. Namely, change requires knowledge (Dole & Sinatra, 1998, p. 109). This task is not a simple one as it requires changing already existing knowledge (Dole & Sinatra, 1998, p. 109), which is currently difficult due to preconceived ideas and beliefs among several different actors that

(10)

discourage women from being a part of the entrepreneurial environment (Balachandra et al. 2019 p. 116; Malmström et al, 2020, p. 1; Marlow, 2020, p. 44; Padavic et al., 2020, p. 62). This implies a lack of knowledge from individuals who are supposed to be supportive actors. Furthermore, it is suggested that women need makeovers to fit into the typical male stereotype of an entrepreneur (Marlow, 2020, p. 44). A much more current perspective indicates that a more nuanced outlook should be adopted, specifically “what entrepreneurship can do for women rather than vice versa” (Marlow, 2020, p. 45). This signifies the importance of continuing to add more perspectives to the entrepreneurial and gender-equal environment. More precisely, the lack of evident research that acknowledges gender diverse team’s effect on new venture performance (Dai et al., 2019, p. 508; Cerqueti et al., 2020, p. 149; Ruiz-Jiménez et al., 2016, p. 504). Therefore, there is a prevalent need of addressing what type of knowledge is necessary to accommodate the new era of creating more gender diverse teams, i.e. the chosen topic of this research.

The reason behind researching this subject in an incubator setting relates to the nature of their purpose, which is to help ventures in their early phases and become viable companies (Bergek & Norrman, 2008, p. 21).

As teams are considered the most important factor for the success of the venture (Almi Invest, 2020b), it was a natural choice to analyze the team formation process in relation to gender diversity as this is a vital yet relatively unexplored environment from the incubator’s perspective (Azmat, 2019). Understanding this subject thereby hopefully contributes theoretically to the effects of gender diverse teams in startups and what current non-diverse teams are overlooking. Additionally, how this can be easily translated into managerial implications practically utilized by incubators to help promote gender diversity in the teams of its incubatees. The focus is characterized by a gender diverse perspective, albeit the female entrepreneurial aspect is highly incorporated within this perspective due to trying to address the issue from its root, where women are the subject of animosity and important supportive actors show a lack of knowledge. In other words, how gender diverse teams contribute to a more gender-equal entrepreneurial environment.

1.2 Problem Background

Entrepreneurial teams are different from organizational teams as they are organically formed, rather than exogenously assigned (Lazar et al. 2020, p. 30). Meaning, not only do the entrepreneurs select their business idea, but also which members to form their team with (Lazar et al. 2020, p. 30). When entrepreneurs choose their team members, they often prefer searching in their small-world networks which contain similar individuals that have personal connections to them (Frese & Gielnik, 2014, p. 426; Ruef et al., 2003, p. 217).

This could lead to homogenous teams that are characterized by low diversity in terms of personality and demography, as well as mutual trust, effective communication, shared perspectives, and smooth division of tasks (Discua Cruz et al., 2013, p. 40; Francis &

Sandberg, 2000, p. 11). The negative aspect involved with forming a homogeneous team based on interpersonal attraction is the absence of diverse and complementary skills that are critical for handling different strategic, managerial, financial, and technological tasks (Lazar et al., 2020, p. 44). Further, when team members are homogenous and share similar skills, it is difficult to allocate team positions to the members (Jung et al., 2017, p. 12). In the context of this study, the focus is on diversity in terms of gender, and therefore, the positive aspects of homogenous teams in regards to mutual trust, effective communication, and shared perspectives, etc. is attained in gender diverse teams as these attributes are not associated to any specific gender. Meaning, a man and a woman can

(11)

share the same perspectives and beliefs. It is important to highlight this as stating that only one of the genders is capable of having certain skills, attributes, etc. contributes to the gender inequalities that already exist. It would be the same as stating that a person of color and someone who is Caucasian cannot share similar viewpoints or skills for that matter.

The entrepreneurial environment today in regards to teams and their composition concerning gender diversity indicates inequality. The statistics demonstrate that out of an examination of 842 ventures that received investments in Sweden, over 80 % were founded by men, barely 13 % were mixed teams, and hardly 6 % were female teams (Olsson Jeffrey, 2020). Research that investigated the distribution of venture capital in 2019 between the genders in Sweden showed a clear skewed picture (Olsson Jeffrey, 2020). Out of the 27.2 billion SEK that was invested during 2019, only about 1 % went to ventures founded by women, which is about the same percentage as for the previous three years (Olsson Jeffrey, 2020). In terms of mixed teams, i.e. ventures founded by both men and women, their amount of received venture capital decreased noticeably in 2019 compared to 2018. The number was only 6 % while near 93 % went to male-founded ventures (Olsson Jeffrey, 2020). Almi Invest, who is said to be Sweden’s most active investor in startups, distributed 29 % of venture capital to female-owned or mixed teams in 2019 (Almi Invest, 2020a). The CEO describes this as an unacceptable skewed distribution. However, the venture capital industry seen in total has a much lower distribution of venture capital to startups who have women in their founding teams (Almi Invest, 2020a), which is illustrated above.

Another comparison that illustrates the inequality is that although one female-owned venture stood out and acquired around 100 million SEK in 2019, the three largest investments in the same year (which went to male-founded ventures) were still about 10 (1 billion SEK); 50 (5.5 billion SEK); and 90 (9.9 billion SEK) times bigger (Olsson Jeffrey, 2020). Furthermore, although the number of investments increased in mixed teams during 2019, the value decreased by more than half compared to 2018 (Olsson Jeffrey, 2020). There is also a clear non-diverse distribution among the genders in terms of what industry they are typically associated with (Sundell, 2019). For instance, women dominate the industry composed of personal services and other service companies at 75

%, while men constitute about 90 % of construction, transportation, and warehousing companies (Sundell, 2019). According to Almi Invest (2020b), the venture’s team is more important than the business idea. Regardless of how brilliant the business idea is, it will all be in vain if the team developing the idea does not go well together (Almi Invest, 2020b). The importance of the members having similar visions and levels of ambition further increases the chances of having a successful startup (Almi Invest, 2020b). Others also state that the entrepreneurial team has a critical role regarding growth trajectories, investment decisions, and overall venture success (Lazar et al., 2020 p. 30). In addition, investors more often bet on the team rather than on the idea (Lazar et al., 2020 p. 30).

This may be disadvantageous for women, as disparate research states that men compose the significant majority of investors as well as they most often choose to invest in other men (Almi Invest, 2020a; Malmström et al., 2018, p. 5.; Robinson & Stubberud, 2009, p.

11).

The subject of entrepreneurial team formation is a popular and growing research area, however, it has a considerable amount of fragmentation (Lazar et al., 2020, p. 29). The reason for this is because researchers have investigated entrepreneurial team formation

(12)

through different lenses and in a lot of different contexts (Lazar et al., 2020, p. 29). The subject of how diversified teams lead to better performance is highly researched among many scholars (Amason et al., 2006, p. 130; Jin et al., 2017, p. 748; Karriker et al., 2017, p. 507; Rock & Grant, 2016, p. 2). However, many researchers suggest that the topic of gender diverse teams needs to be further investigated since there is still a research gap regarding this specific subject (Dai et al., 2019, p. 508; Cerqueti et al., 2020, p. 149; Ruiz- Jiménez et al., 2016, p. 504). Further, one might argue why team gender diversity has been left relatively unexamined in the context of new ventures, while other constructs like task teams, employees, and board of directors have not (Dai et al., 2019, p. 508). This further highlights the theoretical research gap of gender diverse new venture teams in the context of incubators that is to be examined in this thesis. Azmat (2019) adds to this by concluding that there have only been seven studies on this subject in Sweden (See Appendix 1, Figure 5), and they are all at least a decade old. Additionally, none of them include researching the topic in an incubator setting, and nor does the majority of these few studies apply to new venture teams. It is important to fill this research gap as older studies do not correctly depict the current environment on how gender equality and diversity manifest themselves today along with how it still is a pertaining problem.

Similarly, the entrepreneurial environment is constantly changing, and therefore the current situation does not cohere with the outdated previous studies that addressed the gender perspective in this context, nor does it in regards to standing alone from the gender perspective, as a lot of innovative changes have occurred since.

Moreover, women entrepreneurs face inequality (Almi Invest, 2020a; Malmström et al., 2018; Olsson Jeffrey, 2020; Robinson & Stubberud, 2009) even though they are proven to be just as good as male entrepreneurs (Dai et al., 2019, p. 520). The researchers, therefore, pose the question of how this issue can be assisted through developing information that leads to understanding how incubators can advance the promotion and success of gender diverse teams. The motive behind choosing the incubator context relates to the fact that these actors support the development of new ventures as well as aiding their survival and growth in the early stages (Kemp & Weber, 2012, p. 141; Hacket

& Dilts, 2004, p. 41). This leads to the next part, which implies that team formation has critical effects on entrepreneurial success and team performance (Lazar et al., 2020, p.

29), as well as on establishing a venture (Klada, 2018, p. 1). Hence, there is a clear connection between how an incubator should assist team formation to aid the ventures’

success.

1.3 The Role of Gender Diversity in Entrepreneurial Teams

According to Bailey and Skvoretz (2017, p. 8), entrepreneurs select their teams based on homogeneity, however, this might not be very beneficial for the team. Studies show that heterogeneity, rather than homogeneity, is more favorable for a successful team (Amason et al., 2006, p. 130; Jin et al., 2017, p. 748; Karriker et al., 2017, p. 507; Rock & Grant, 2016, p. 2). A diverse team refers to a heterogeneous distribution of attributes among team members (Ruiz-Jiménez et al. 2016, p. 505). This diversity can be recognized through for example different genders, nationalities, races, education levels, and ages (Ruiz-Jiménez et al. 2016, p. 505). Furthermore, innovation performance is also found to be improved when there is a diversity in teams in terms of demographics, experiences, education, and functions among other characteristics (Dai et al. 2019, p. 507). Team members with diverse attributes can contribute with different viewpoints (Adams & Funk, 2012, p. 219), as well as a positive impact on profitable new venture creation (Muñoz-

(13)

Bullon et al., 2015, p. 80). Moreover, a diverse team may offer more resource variety to the entrepreneur, which in turn, is considered desirable for a successful engagement in the new venture creation process (Muñoz-Bullon et al., 2015, p. 98). These diverse team members also act as facilitators of resource acquisition that for a homogeneous team would be unavailable or costly to locate (Muñoz-Bullon et al., 2015, p. 98).

The current environment indicates that men predominantly compose the teams of startups across different countries and cultures, even in those where there are relatively high levels of gender equality (Dai et al. 2019, p. 509). A provoking fact to this becomes how the characteristics of women and men entrepreneurs comprise a complementary relationship that can create synergy in improving a new venture’s innovation performance (Dai et al.

2019, p. 520). The typical male characteristics of command and control complement the female flexibility and democratic managerial approach (Dai et al., 2019, p. 510).

Together, they can combine their unique perspectives and insights to fully exploit their innovation (Dai et al., 2019, p. 510; 520). Additionally, having more gender diverse teams may have long-lasting effects, and even though one might believe women are more risk- averse, their presence does not necessarily lead to more risk-averse decision-making (Adams & Funk, 2012, p. 234). Moreover, it is rather impossible to distinguish between women’s and men’s priorities in their decision-making (Adams & Funk, 2012, p. 234).

“The greater the presence of women entrepreneurs, the greater a firm’s knowledge differentiation, and integration” (Dai et al. 2019, p. 508). This quote signifies the importance of gender diversity in teams as women are currently underrepresented in this male-dominated industry. The authors Dai et al. (2019) illustrate this by highlighting a few examples. For instance, research from Chung & Monroe, 1998; Darley & Smith, 1995; Putrevu, 2001 (cited by Dai et al. 2019, p. 506) state that unique information processing, knowledge, and managerial styles are prevalent among women. Moreover, the extent to which ventures innovate and manage their knowledge can be changed by the presence of women entrepreneurs in new venture teams (Dai et al. 2019, p. 506). There is further research that supports that gender diversity leads to greater innovation performance (Torchia et al. 2011, p. 299). Ruiz-Jiménez et al. (2016, p. 511) state that the ability to innovate is enhanced through varied knowledge which increases the team’s capacity to make innovative linkages, associations, and combinations. Besides, there is a difference in the relationship between innovation performance and knowledge combination capability when it comes to low and high gender diversity (Ruiz-Jiménez et al. 2016, p. 510). The last-mentioned, i.e. high gender diversity, implicates much greater positive effects towards the capability of knowledge combination and thereby generating higher levels of innovation performance (Ruiz-Jiménez et al. 2016, p. 510). Furthermore, it is beneficial to include women entrepreneurs in new venture teams as they, in terms of collaborating with stakeholders, are better at seeking the stakeholders’ ideas and coordinating their benefits, giving attention to ideas that not necessarily fit into their mental schemas, and process and integrate them in an effective way (Dai et al. 2019, p.

509). Unlike men who tend to have a more dominant and controlling approach to these types of situations (Dai et al. 2019, p. 509).

There is also a difference between the genders’ socialization experiences, referring to career paths and social networks (Kalafatoglu & Mendoza, 2017, p. 332; Watson, 2012, p. 537). Nonetheless, women being present in male-dominated social and industrial environments usually implies providing unique insights into the critical tasks faced by teams in new startups, including for example tasks related to process and product

(14)

innovation (Dai et al. 2019, p. 509). This is especially true when it comes to tasks that involve interacting with key stakeholders, like employees and consumers (Dai et al. 2019, p. 509). According to Dai et al. (2019, p. 520), there was no evidence of the superiority of either women or men in their entrepreneurial behavior when it came to innovativeness or creativity. However, differences were identified in their cognitive approaches to opportunity recognition and identification (Dai et al., 2019, p. 520). Further evidence shows that women entrepreneurs are more sensitive to subtle cues (Darley & Smith, 1995, p. 43), and tolerant towards information that typically does not fit their existing mental schemas (Dai et al. 2019, p. 509). Therefore, including women in new venture teams allows them to be more open to unexpected and unfamiliar information, which otherwise would have been missed (Dai et al. 2019, p. 509). This heterogeneity of including women in teams leads to a more comprehensive and differentiated set of solutions within the team (Dai et al. 2019, p. 509).

1.4 Purpose

The motive behind this study has its roots in the gender equality perspective where it intends to diminish the invisibility of women in the entrepreneurial world and hopefully contribute to women being seen as equal to their male counterparts. The purpose can be described as multidimensional. The reason behind this is the dual perspective of looking at both the incubator and the incubatee to gain a richer understanding of gender diversity’s role in the team formation process. The purpose of this study is to research what hinders and supports the formation of gender diverse teams in the early stages of creating a new venture. Additionally, how an incubator can contribute to the establishment of these teams in new ventures. This involves investigating how the thought process of team formation among entrepreneurs can be explained and what the role of gender diversity has in this context. It answers how they choose their team members, what criteria they have, if they search for similar people, and mainly if they consider the gender diverse aspect when building their team. The purpose of this study further intends to investigate what hinders and supports the upholding of gender diverse teams in the early stages of a new venture and how an incubator can influence this. Researching what affects the upholding of gender diverse teams as compositions were relevant due to the changing nature during the venture’s development and what can be done to influence the stability and support growth of the team and venture. Answering this is necessary due to the lack of applied research in the area of gender diverse new venture teams. It further contributes to working against the prevalent gender equality issues as well as bringing attention to building more gender diverse teams. This enriches the theoretical field of entrepreneurship and gender literature that is currently characterized by the absence of an incubator setting, especially in the Swedish environment.

1.5 Research Questions

1. What hinders and supports the formation of gender diverse teams and how can an incubator contribute to the establishment of these teams in new ventures?

2. What hinders and supports the upholding of gender diverse teams in the early stages of a new venture and how can an incubator influence this?

(15)

1.6 Expected Results

The expected results for this thesis relate to the field of entrepreneurship. Some possible theoretical contributions that this study might add include partially filling a literature gap that was found in regards to gender-equal new venture teams in the Swedish context. The findings could potentially support previous research on gender diverse teams and how they have a positive impact on company performance. In addition, this research might continue to strengthen the notion that gender equality is an issue that still pertains today and that the findings shed light on how to tackle these, particularly from an entrepreneurial standpoint. Hopefully, this thesis also adds new findings to the field of entrepreneurship from an incubator and team perspective, rather than only strengthening (or disproving) existing literature. Furthermore, this study could contribute to the understanding of the team formation process and how that process is affected by a gender diverse perspective. On a more practical note, this thesis could provide help or guidance for incubators that want to contribute to building more gender-equal teams. Hopefully, the findings of this study can translate into managerial implications which can practically be used by incubators or any other promoting actor of nascent entrepreneurs. These actors can similarly help bring attention to the importance of this issue and raise awareness among startups to help break the cycle of creating non-gender diverse teams. Alongside, this research is expected to contribute to the understanding of team members’ thought processes during the team formation stage. By analyzing their perceptions, it may potentially guide the comprehension of how gender issues play their role in choosing team members and what is considered important. Thereby, the study expects to encourage a more holistic research perspective by analyzing both occurrences, meaning the understanding of team formation and the means to promote gender diversity.

1.7 Delimitations

The scope of the study is discussed by explaining the delimitations and reasoning behind certain active choices. There are some delimitations made, the first one addresses the fact that gender equality can be researched from many different perspectives. However, in this case, the thesis applies the topic in an entrepreneurial context with a specific focus on incubators and teams. There are a few reasons behind this. The first one resulted in an instant scope due to the study being written on commission. This implies that the results may not be generalizable to other countries, as the research is based on perspectives taken from the Swedish context. Second, there is an identified research gap in regards to gender diversity among new venture teams in Sweden. Some other delimitations involve the incubator and its incubatees. This refers to the time and resource constraints, which infer that not all incubatees will be part of the sample. On the contrary, the study is not entirely limited to only gathering data from the incubator, i.e. the commissioner. It was introduced to the researchers that there are some, however, very few actors who have begun working with this subject. Thereby, the scope is delimited to Swedish incubators as the sample in the data collection will include more than the commissioner.

1.8 Definitions

Entrepreneurial Team - “Two or more individuals who have a significant financial interest and participate actively in the development of the enterprise” (Cooney, 2005, p.

229)

(16)

Gender Diversity - “Equal or balanced representation of people of different genders in the workplace or other contexts and/or organizations.” (IGI Global, 2021)

Gender Equality - “Gender equality means that women and men have the same rights, responsibilities and opportunities in all areas of life.” (Swedish Gender Equality Agency, 2018)

Incubator - “An organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections.” (Entrepreneur, 2021)

Incubatee - “Firms that have been registered under an incubator and had been in operation for a period of time.” (IGI Global, 2021)

(17)

2. Theoretical Frame of Reference

This chapter begins by defining both what an entrepreneurial team and gender are to clearly state the researchers’ viewpoint on these, as well as aid the readers’

understanding of the subsequent sections. This is followed by a few paragraphs regarding entrepreneurial team formation. Thereafter, the connection between the team and incubator is highlighted. Theories related to upholding the team are then presented. The next section discusses the obstacles and support for gender diversity and the chapter ends by presenting the research framework.

2.1 Entrepreneurial Team Definition

There are many different definitions of a team (Lock & Heere, 2017, p. 416), which can also be derived from searching in different literature databases which indicate a vast majority of team research in different contexts from various industries. In this particular thesis, the definition concerns entrepreneurial teams and what those entail, which will be further discussed below. Schjoedt and Kraus (2009, p. 515) provide this definition:

“An entrepreneurial team consists of two or more persons who have an interest, both financial and otherwise, in and commitment to a venture’s future and success; whose work is interdependent in the pursuit of common goals and venture success; who are accountable to the entrepreneurial team and for the venture;

who are considered to be at the executive level with executive responsibility in the early phases of the venture, including founding and prestart up; and who are seen as a social entity by themselves and by others.”

To clarify, the researchers of this study consider an entrepreneurial team to equal a new venture team, and will from now on be perceived as interchangeable terms. Regarding a

“new” venture team, the distinction is not always clear concerning what is considered new (Middleton & Nowell, 2018, p. 882). This means that there are occurrences where the venture idea and/or team construct is new, but the entrepreneurs (team members) are experienced. In other instances, both the idea and construction of the team are new, as well as the team members being new to the entrepreneurial environment (Middleton &

Nowell, 2018, p. 882). Implying that the word “new” in a new venture team can refer to the entrepreneur, idea or team construct being the novel factor. Inspiration can also be drawn from the organizational field of study to explain new venture teams (Middleton &

Nowell, 2018, p. 884). Be that as it may, the findings from this type of research must carefully be extrapolated if applied to the new venture team context (Foo, 2011, p. 43).

This resonates with the fact that traditional organizational settings are relatively different from new venture creation (Klotz et al., 2014, p. 239). According to Harper (2008, p.

614), the most significant difference is the level of uncertainty inherent in the process of creating a new venture. Newer research has focused on analyzing how new venture teams deal with uncertainty upon building social ties (Middleton & Nowell, 2018, p. 884).

2.2 Gender Definition

The researchers found it important to delineate the definition of gender and how it is perceived in this study before it is discussed in relation to the chosen field of study, especially since gender fluidity is a current and growing concept (Parker, 2016, p. 166).

First and foremost, The World Health Organization (2021) defines gender as the

(18)

following: “Gender refers to the characteristics of women, men, girls and boys that are socially constructed. This includes norms, behaviors, and roles associated with being a woman, man, girl, or boy, as well as relationships with each other. As a social construct, gender varies from society to society and can change over time.”. The researchers acknowledge and agree with this definition as the purpose of this thesis is to investigate how this takes effect in a gender diverse team perspective. Meaning, how the different associated characteristics of the genders affect the team and the success of their venture.

Gender fluidity on the other hand is a term that entails identifying oneself with a gender beyond the binary man or woman (Parker, 2016, p. 166). However, as the focus remains on gender diverse teams in terms of men and women and the associated attributes of those two, the gender fluidity concept will not be taken into consideration. As certain characteristics are associated with the two genders, a description of those normative characteristics will be included as it has an impact on the perception of men and women and how they are treated in an entrepreneurial context (Balachandra et al. 2019, p. 117;

Lewis, 2006, p. 454). Normative characteristics have two categories; descriptive norms and prescriptive norms (Ferguson, 2018, p. 410). Descriptive norms refer to the behavior of individuals, whereas prescriptive norms infer the behaviors individuals are supposed to have (Kroska & Cason, 2019, p. 77). In a similar stance, Ferguson (2018, p. 410) discusses how descriptive norms equals the shared beliefs about what the genders do, in contrast to the shared beliefs of what the genders should do, i.e. prescriptive norms. To exemplify, women are often stereotypically described as helpful, sympathetic, and should have a nurturing role, while contrastingly men are described to be assertive and independent (Balachandra et al. 2019, p. 117; Ferguson, 2018, p. 410).

2.3 Entrepreneurial Team Formation

This section will discuss elements related to entrepreneurial teams, such as the team formation process, strategies for choosing team members, and the impact of context.

These theories have been included to aid the understanding of the first research question, i.e. what hinders and supports the formation of gender diverse teams.

2.3.1 The Team Formation Process

The formation of entrepreneurial teams differs from other organizational teams as they are organically formed, rather than exogenously assigned (Lazar et al. 2020, p. 30). This means that when entrepreneurs form their teams, they not only select the business idea to develop but also which partners to work with (Lazar et al. 2020, p. 30). According to Lazar et al. (2020, p. 42), their findings resulted in a framework that explains that the founding team process is affected by the founding team characteristics, which eventually influences the ventures’ performance. The authors highlight how this process is dynamic and unfolds over time, as opposed to a single occurrence (Lazar et al., 2020, p. 42). This comparison is illustrated between Figures 1 and 2 below, which shows how the standard model of a team formation process was viewed, compared to the newer dynamic perspective introduced by Lazar et al. (2020, p. 43). The traditional model is described as sequential, which is based on McGrath’s (1984) IPO framework (i.e. an input-process- output framework), where the team formation precedes the determination of team characteristics, which consequently affect the team process and finally influence the performance (Lazar et al., 2020, p. 42).

(19)

Figure 1. Standard Entrepreneurial Teams Model

On the other hand, Figure 2 does not have clear demarcations of steps due to its dynamics.

Instead, Lazar et al., (2020, p. 42) assert that the legality aspect signals the end mark of a team formation process. This builds on the symbolic meaning the legal incorporation signifies by determining who all founding team members are as well as the formalization of roles between them, an important milestone in team evolution (Nikiforou et al., 2018, p. 90; Vanaelst et al., 2006, p. 263). The figure below further illustrates formation strategies that the lead entrepreneur or cofounders use to seek additional team members (Lazar et al., 2020, p. 42). These could either be interpersonal attraction or resource- seeking strategies or in some cases a shift or combination between them. Other authors who also share a likewise perspective of team formation and the approach to finding new team members are Forbes et al. (2006, p. 225) and Ben-Hafaiedh-Dridi (2010, p.1) who conclude that research offers these as the two main perspectives. Forbes et al. (2006, p.

225 arrived at the same results, meaning that team formation is viewed as a dynamic process. In addition, they too identified resource-seeking and interpersonal attraction as primary motivators, and that there can be complementaries of them both in practice (Forbes et al., 2006, p. 225). Team characteristics, processes, and performance are three factors that are influenced by the choice of strategy. More precisely, the teams’ structure and diversity are workgroups decided, in addition to shaping team processes regarding the use of specialized resources and coordination (Lazar et al., 2020, p. 42). An important factor is that these formation strategies and nascent outcomes are affected by the context founders are in, which refers to the social network, setting, and culture (Lazar et al., 2020, p. 42).

Figure 2. Dynamic Entrepreneurial Team Model

(20)

2.3.2 Strategies: Choosing your Team Members

How do individuals pick their team members and what affects this? Bailey and Skvoretz (2017, p. 8) answer this by describing how the following four mechanisms; affect, homophily, familiarity, and competence, influence partner selection. Firstly, Affect refers to one’s feelings about how supportive or unsupportive a potential team member is perceived and will, according to Bailey and Skvoretz (2018, p. 8), strongly influence the selection pattern of team formation. Secondly, Homophily affects the selection of team members as it specifies that people who share a sense of social identity, i.e. there are experienced homophilous ties between workgroups, will more likely pick each other (Bailey & Skvoretz, 2017, p. 8). Thirdly, Familiarity unfolds similarly because the individual is more inclined to form their team with people whom they already know rather than with strangers (Bailey & Skvoretz, 2017, p. 8). Lastly, Competence as a mechanism for choosing team members indicates that it is used by people to recruit individuals and previous research shows that it is adopted by using “diffuse status characteristics and reputational information as social cues to indicate competence” (Bailey & Skvoretz, 2017, p. 8).

Other authors discuss that when choosing team members, entrepreneurs often prefer searching in their small-world networks that contain similar individuals with personal connections to them (Frese & Gielnik, 2014, p. 426; Ruef et al., 2003, p. 217). This could result in homogenous teams that are characterized by low diversity in terms of personality and demography, as well as mutual trust, effective communication, shared perspectives, and smooth division of tasks (Discua Cruz et al., 2013, p. 40; Francis & Sandberg, 2000, p. 11). This team formation perspective of choosing members who are similar to yourself is also called a social psychological model (Middleton & Nowell, 2018, p. 884). Here, the emphasis is on the interpersonal fit among the team members, rather than on their skills and competencies (Middleton & Nowell, 2018, p. 884). The negative outcome of choosing team members based on interpersonal attraction is the lack of diverse and complementary skills that are vital in dealing with different strategic, financial, technological, and managerial tasks (Lazar et al., 2020, p. 44). For example, position allocation was puzzling when team members possessed similar skills (Jung et al., 2017, p. 12). Therefore, a better tactic would be to follow the rational process model instead.

Based on this model, entrepreneurs choose their team members based on competencies and pragmatics, with an emphasis on skill-set and work experience (Middleton & Nowell, 2018, p. 884). By putting value in finding team members with complementary skills, the team should be more capable of dealing with complex key issues (Middleton & Nowell, 2018, p. 884).

Another strategy that contributes to a more diverse team is based on resource-seeking selections, which are mostly motivated by monetary incentives (Hellmann & Wasserman, 2017, p. 2651; Kamm & Nurick, 1993, p. 17). This resource-seeking strategy could increase the heterogeneity of teams with its informational and high functional diversity that allows team members to rely on each other’s expertise and leverage these skills to increase the resources of the team (Clarysse & Moray, 2004, p. 77). However, only focusing on resource-seeking strategies may lead to negligence in the development of cohesion and understanding among the members of the team (Lazar et al., 2020, p. 44).

Too much diversity among team members can result in a lack of shared perspectives that in turn could contribute to challenging coordination of activities characterized by unsmooth functions (Forbes et al., 2006, p. 234). A combination of both interpersonal attraction and resource-seeking strategies during the formative stage increases the

(21)

chances of obtaining the requisite characteristics, e.g. homogeneous personal and demographic factors and diverse functional and informational factors. It also fosters necessary processes like specialization and coordination processes that induce superior performance (Lazar et al., 2020, p. 44). This kind of dual formation strategy can occur both simultaneously or sequentially, the former through hybrid strategies in the beginning stage and the latter via shifting strategies in the formation stage (Lazar et al., 2020, p. 44).

Scholars have found positive interactive effects between interpersonal attraction and resource-seeking strategies. Furthermore, resource-seeking often acts as a base for the initiation of relationships, however, it is not an adequate strategy to guarantee higher value (Grossman et al., 2012, p. 1775; Shah et al., 2019, p. 1420). Together, the two strategies have a mutually reinforced nature that can be generalized to many different settings (Lazar et al., 2020, p. 44).

2.3.3 The Impact of Context

According to Lazar et al. (2020, p. 45), context plays a significant role in shaping the team formation process. For instance, context intersecting social networks have a dramatic impact on how founders in a team are selected. To exemplify, a resource-seeking strategy (as explained above) will primarily be relied upon by founders if they are established within an institutionalized setting represented by broad and distributed networks like accelerators or academic institutions (Lazar et al., 2020, p. 45). In both contexts, meaning accelerators or academic institutions, the important criterion for finding and forming new venture teams is competence (Lazar et al., 2020, p. 45). Accelerator networks are utilized in the search for new team members who can promote the accumulation of resources and learning (Cohen, 2013, p. 38). Similarly, team members in the academic setting are embedded in networks of large and international size and they are chosen based on the expertise and capabilities of the individuals. Therefore, founders can utilize distant, weak, and indirect ties to seek new members (Mosey & Wright, 2007, p. 911). In more local clusters of social relations like family and employment, founders are commonly known to use an interpersonal attraction-seeking strategy, but sometimes also resource seeking (Lazar et al., 2020, p. 45). The search among founders in family businesses was located in tight-knit friends and family networks and the choice was based on who appeared more likely to be similar and have an interpersonal fit (Francis & Sandberg, 2000, p. 11; Zhang, 2010, p. 342), or if they felt stewards of the family business (Discua Cruz et al., 2013, p.

33). Nevertheless, there were instances in this type of setting with networks of embedded ties where founders used instrumental criteria to find potential team members (Shah et al., 2019, p. 1419). This meant that some type of diversity was prevalent in the small clusters and perhaps the search for heterogeneity may be forthcoming in this context (Aldrich & Kim, 2007, p. 158; Parker, 2009, p. 79). For example, complementary resources could be found by founders in industry spin-outs by using their local clusters to initiate relationships with previous work affiliations and former employees (Lazar et al., 2020, p. 46).

The context is also said to have a great impact on the team formation process’ dynamism, which affects the intensity, triggers, frequency, and the formation period’s duration of iterations that occur (Lazar et al., 2020, p. 46). The reason behind this relates to how context and networks affect the formation strategy and search for team members (Lazar et al., 2020, p. 46). To exemplify, an employee entrepreneurship setting, which is within a small-world configuration, can be more rapid and not require as many iterations and change in memberships compared to a contrasting setting of distributed networks like the academic context described previously (Forbes et al., 2006, p. 241; Vanaelst et al., 2006,

(22)

p. 267). There are three potential inherent factors depending on the context which affect team formation (Lazar et al., 2020, p. 46). First, decision and control rights among founders may be greater in the context of family businesses and industry spin-outs where internal factors determine the need for changes in memberships (Lazar et al., 2020, p. 46).

On the other hand, this factor of control among founders is somewhat limited in the accelerator and academic spin-off context, where membership changes are more likely identified by external agents (Lazar et al., 2020, p. 47).

Second, the small-world network and local clusters context are argued to grant founders the ability to use the familiarity aspect and profound knowledge about team members in their limited search space (Aldrich & Kim, 2007, p. 159). This context, compared to the opposite, hence implies that identifying cofounders occurs more in a direct manner (Lazar et al., 2020, p. 47). Third and lastly, the choice and combination of strategies directed at identifying cofounders are dependent on the context as well (Lazar et al., 2020, p. 47).

Dual strategies, i.e. using both an interpersonal and resource-seeking strategy as previously described in section 2.3.2, are argued to fit the context of small-world networks and local clusters (Lazar et al., 2020, p. 47). However, a hybrid strategy is more appropriate for the small-world networks (local clusters) comprising former employees, where a shifting strategy between the two fits in academic settings. These arguments are built on the foundation that cherry-picking potential team members of both resource and interpersonal fit can be enabled in local clusters (Shah et al., 2019, p. 1436). On the contrary, distributed networks do not favor cherry-picking, which means that founders need to shift between appropriate strategies rather than from the beginning using a hybrid one (Lazar et al., 2020, p. 47).

Previously, team formation processes and team characteristics have been discussed. The context is also argued to affect these occurrences (Lazar et al., 2020, p. 47). What is meant by this is that the characteristics of the context have implications for the characteristics of the new venture team. For instance, a context composed of small-world networks is inherently characterized by homogeneity, which is why there is no surprise that the entrepreneurial teams in this setting are more homogenous (Lazar et al., 2020, p. 47).

Comparatively, a setting composed of broad networks with distant and indirect ties is naturally more heterogeneous, meaning teams forming in this context have more dissimilarities among them (Lazar et al., 2020, p. 47). The important distinction that comes from this is that some characteristics of a new venture team are perhaps dictated by context, as opposed to being a consequence of founders deliberately searching for certain characteristics (Lazar et al., 2020, p. 47). This is exemplified by Shah et al. (2019, p. 1445), who states that the demographic composition of a team in an employee context can explain the homophily in gender and race. Similarly, a team composed of functional diversity stems from a deliberate search (Shah et al., 2019, p. 1436). The context could in comparable ways be applied to how unequal equity distribution is common in employee entrepreneurship contexts and family businesses, and thereof not a strategic design choice (Lazar et al., 2020, p. 47). Analogously, context affects the team process. For instance, many incubators and accelerators encourage knowledge-sharing and learning processes (Grimaldi & Grandi, 2005, p. 111). Likewise, specialized processes are more common in teams who come from an employee or academic context (Clarysse & Moray, 2004, p. 57;

Forbes et al., 2006, p. 237; Grossman et al., 2012, p. 1765; Iacobucci & Rosa, 2010, p.

370).

(23)

The table below (see Table 1) illustrates a summary of the contextual impact on team formation. The table allows an overview of the different types of contexts and which strategy is most common and/or appropriate. The typical characteristics of these environments are also highlighted.

Table 1. Contextual Impact on Team Formation

Context Strategy Characteristics

Small-world network/

Local cluster

Interpersonal Tight-knit friends and family networks, greater founder control rights, homogeneity

Formation process: rapid, few iterations and changes in memberships

Institutionalized setting (broad and distributed networks like accelerators or academic institutions)

Resource-seeking Competence-based, distant week indirect ties,

somewhat limited founder control rights,

heterogeneity Formation process:

specialized process, slower membership changes caused by external agents Small-world network/

Local cluster

Hybrid Both resource &

interpersonal fit, former employees, cherry-picking

Academic setting Shifting More appropriate to shift

between strategies than using a hybrid, no cherry- picking

The context is further argued to influence team dynamics according to Middleton and Nowell (2018, p. 885). The reason being that new venture teams are heavily affected by bounded structural uncertainty and strong interdependence (Harper, 2008, p. 624). The formerly mentioned point out the uncertainty of entrepreneurial activities that are shaped by limited knowledge regarding future occurrences and circumstances, while governed by social and institutional norms and systems (Harper, 2008, p. 618). Navigating a new venture through different phases is a part of the responsibility of a new venture team. The leadership structure they adopt during these stages is limited by established norms that are there to guide “appropriate behavior” (Klotz et al., 2014, p. 228; de Mol et al., 2015, p. 243). Norms, routines, and policies are also created which shape the venture’s culture (Middleton & Nowell, 2018, p. 885). These creations leave an imprint on the venture which lasts beyond the reign of initial team members and therefore become a part of the

(24)

venture’s culture (Klotz et al., 2014, p. 228). The strong interdependence aspect is said to prepare entrepreneurs for identifying themselves as team members (Bacharach et al., 2006, p. 143), as well as embrace a “we-frame” when it comes to problem-solving (Harper, 2008, p. 619). Bounded structural uncertainty and strong interdependence are inescapable for new venture teams (Harper, 2008, p. 624), and what these factors help to explain is the experienced necessity of trust among team members and why many ventures choose to start with familiar colleagues, close friends, and in particular families/spousal pairs in their teams (Blenkinsopp & Owens, 2010, p. 359; Discua Cruz et al., 2013, p. 22; Francis and Sandberg, 2000, p. 8).

Diakanastasi et al. (2018, p. 14) researched new venture teams in an incubator and found a few issues that affect the venture performance negatively. Nascent entrepreneurial teams need to share the same motives and expectations to be more successful (Diakanastasi et al., 2018, p. 14). Additionally, a lack of proper professional background, inappropriate leadership, and disorganized communication between the members of the team result in a decrease in team cohesion (Diakanastasi et al., 2018, p. 14; Weisz et al., 2010, p. 44). Some other crucial factors that affect the team performance are the member’s commitment level, the size of the team, and how well the roles of the different team members are set (Diakanastasi et al., 2018, p. 14; McCann & Vroom, 2015, p. 631). The team dynamics are affected by the above-mentioned factors, and ultimately also affect the new venture performance (Diakanastasi et al., 2018, p. 14). By being aware of these issues, the incubator can advise and assist its incubatees in the team formation process and therefore help them avoid falling into the above-mentioned traps. Instead, the new venture teams will have a better basis for building a successful team.

2.4 Incubator & The Team

The definition of an incubator is often described as helping new ventures to both survive and grow during their early stages (Kemp & Weber, 2012, p. 141). Other scholars also address the importance of network recognition that often is a part of the incubator (Hackett & Dilts, 2004, p. 41). This particular network generally consists of the incubator’s employees and its incubatee companies, and also other outside actors like, for example, universities, professional service providers, industry contacts, and venture capitalists (Hackett & Dilts, 2004, p. 41). Furthermore, Bergek and Norrman (2008, p.

20) explain how an incubator serves as a tool to encourage new ventures to achieve economic development and innovativeness. They further discuss that a good description of an incubator involves contributing with a supportive environment for startups (Bergek

& Norrman, 2008, p. 21). Additionally, these scholars have identified four aspects of an incubator that have received a lot of attention in previous research. These involve sharing spaces of work, receiving professional business-related advice and/or support, access to networks, and the possibility to reduce overhead costs through access to a pool of shared supportive services (Bergek & Norrman, 2008, p. 21). Another important aspect of the incubator's purpose involves which part of the ventures’ development process they are a part of. The answer to this is the early phases of the venture’s life, which refers to the undeveloped business ideas where the purpose is to help them turn the new ventures into viable companies (Bergek & Norrman, 2008, p. 21).

An incubator can support a venture in many different stages of a new venture, but most often commonly given in the early phases, i.e. before the venture becomes a viable company (Kemp & Weber, 2012, p. 141). In this particular context, the Swedish

(25)

incubator, i.e. the commissioner, offers two different programs targeted at different stages of the venture. These are; Boost Chamber and Incubator Program. The first-mentioned is more so targeted at the single individual being offered the chance to develop their idea and try on the role as an entrepreneur. The Boost Chamber also allows the individual to think about what role he/she should have and if other competencies are necessary, and in that case, how a potential team would look like. The Incubator Program is much more extensive and the new venture has surpassed the initial idea development. The program involves a tailored plan to the ventures’ needs, business coaching, networking, lectures and seminars, and a greater amount of time dedicated to developing the business and its opportunities in the chosen market. During this time, working with the team (establishing, developing, etc.) occurs regularly. There is also a difference in the duration between these two, the Boost Chamber only lasts 10 weeks, compared to the 18-month long Incubator Program.

The incubator can affect startup teams’ formation processes, and by that help them form the best team possible that is attractive in the eyes of an investor. To do so, three key things are crucial to know about startup teams (Brattström, 2019, p. 10). First, the team is often homogenous, which makes it agile but also subject to social and cognitive blind spots (Brattström, 2019, p. 10). Second, the working conditions are constantly changing and the teams often find it quite difficult to tailor to certain relationships, roles, and rewards over time (Brattström, 2019, p. 10). Lastly, the team is completely dependent on its’ members’ willing commitment and can struggle to remain together during difficult times. These are crucial factors to know as it helps to understand how startup teams work (Brattström, 2019, p. 10), which is of importance for incubator coaches to help form its incubatees’ teams. Other external stakeholders such as venture capitalists, or potential alliance partners should also be aware of these factors in the said team (Brattström, 2019, p. 10). Most importantly, these three things are vital for the team to tackle to be attractive in the eyes of potential investors as they will not spend time or money in an unpredictable endeavor like a startup if they cannot identify the startup team’s strengths and weaknesses (Brattström, 2019, p. 10). The incubator can in this context aid its incubatees in creating the best potential team that does not fall subject to any of the blind spots or possible changes in roles and relationships.

2.5 Team Upholding

The upholding of a new venture team differs from the formation process and is important to examine because of its effect on the team and new venture performance (Chen et al., 2017, p. 934; de Mol et al., 2020, p. 3). Emerging new ventures are constantly changing and therefore, short-term performance can be very different from long-term performance outcomes, which makes this effect essential to analyze (de Mol et al., 2020, p. 3). In the short term, the amount of passion diversity between team members can reduce the quality of the team’s business ideas (de Mol et al., 2020, p. 2). While the long-term performance of the venture can be diminished due to diversity in the focus of team members’ passion (de Mol et al., 2020, p. 2). For incubators, this knowledge legitimizes the importance of dealing with entrepreneurial team composition and, more precisely, entrepreneurial passion levels and domains when upholding venture building or investing in teams (de Mol et al., 2020, p. 2). Additionally, other scholars also highlight the importance of passion among team members (Santos & Cardon, 2019, p. 496). They concluded that not all teams experience shared passion, and even less at a high level (Santos & Cardon, 2019, p. 496). There was a common source of disunion among these teams and it was in the

What Hinders & Supports the Formation & Upholding of Gender Diverse Teams?: An Exploratory Case Study Researching New Venture Teams in a Swedish Incubator