No job exists in a vacuum. For any position, whether moving laterally or climbing the corporate ladder, all employees bring their prior company experience into their new lines of work. This is especially true for founders of new companies— as a large project on Silicon Valley startups by Professor Christine Beckman (Department of Technology Management at UCSB) has demonstrated. Beckman’s research shows that a founding team’s prior company experience shapes the creation, strategic behavior, and even the likelihood of growth for new firms. Over the years, this paper has become one of Beckman’s most highly cited pieces and remains relevant in today’s work landscape.
Beckman categorized founding firm actions as exploratory or exploitative, and hypothesized that these actions would differ depending on founding team composition. She theorized that founding members who came to their new company from the same company would stick to familiar methods and focus on efficiency, otherwise known as exploitation behaviors. On the other hand, she theorized, founding members who came from different companies would be more open to unique ideas, aiming to branch out and broaden their search for new opportunities, otherwise known as exploration behaviors. Founding teams that had both similar and distinct prior affiliations would benefit from increased efficiency, but also take advantage of more opportunities, which would result in a higher level of success.
Beckman studied 141 high-technology firms, comprising 329 founders who had worked for a total of 1,300 prior employers. Through coding interviews and hand-collecting career backgrounds, she found strong support for her hypotheses. In her sample, there was a significant likelihood for an exploration strategy in companies with diverse prior company backgrounds. The association between exploitation strategies and founding teams with common prior company backgrounds was also significant. But only firms that had both types of prior company affiliations were more likely to grow.
Beckman’s research also highlighted some interesting findings that she didn’t include in her original predictions. For one, large founding teams were 60% more likely to change their basic firm concept, and when a firm’s founding team had a new addition with a different company affiliation, the firm concept was almost 40% more likely to change. This implies that the more diverse backgrounds are involved in the creation of a firm, the more that original idea is likely to evolve and shift before cementing itself. Similarly, large founding teams were found to be slower to bring products to market, while founding teams with members with previous common company affiliations brought their products to market more quickly. This difference suggests that team members who share previous experiences, skillsets, and understandings will be more likely to jump to action quickly, while developing new products or ideas may require more discussion and time to reach consensus with competing, but unique ideas.
Ultimately, what Beckman’s study suggests is that there is an undeniable connection between founders’ prior company experiences and the trajectory of their new businesses. These prior connections can be used to predict the likelihood that a firm will change and grow, and the speed at which firms will make decisions. Beckman’s research also suggests that founding teams that have a higher number of shared and distinct experiences will achieve the highest rewards.
How can you implement the findings from this research into your workplace?
This study suggests that when managers are looking to hire new team members, it’s important to consider not only what they know, but where they have come from. Team members bring previous experiences into their new jobs, which includes functional experience, but also more intangible experiences from the different companies for whom they have worked. Beckman’s research suggests that pulling in members with a wide variety of prior affiliations, both common and unique, can lead to greater yields.
Haven’t thought of optimizing for prior company connections before? Here are some ways you can consider them in your workplace as a manager, or even as an employee:
- Be aware that prior career experience can color your employees’ decisions. We often hire for functional experiences. We know that demographics like race, gender, and age also shape people’s experiences. But consider too that your employees bring their prior company affiliations with them into every meeting and project. Make sure you diversify the voices in the room from this angle, too!
- Don’t discount similar or seemingly lackluster backgrounds in the hiring process. The individual you’re hiring won’t work alone, so it pays to hire for a team. Remember to look at their team members and higher-ups to see if their backgrounds may match up, or if you can potentially diversify a group with new prior company affiliations.
- Open the floor for more discussions about your coworkers’ previous experiences. Employees may feel like their past affiliations aren’t relevant, or may not realize that a line can be drawn between what they’re doing now and what they used to do then. An open discussion and friendly conversation can lead to breakthroughs! Whether you’re creating a new company from scratch or expanding your existing team, it’s important to take all of the factors that might affect your path forward into account. Beckman’s research shines a light on a significant one: prior company affiliations.