Team Heterogeneity in Startups and its Development over Time

We investigate the workforce heterogeneity of startups with respect to ed- ucation, age and wages. Our explorative study uses data on the population of 1,614 Danish firms founded in 1998. We track these firms until 2001 which enables us to analyze changes in workforce composition over time. Such a dynamic analysis constitutes a hitherto neglected area of entrepreneurship re- search. To assess relative workforce heterogeneity, we construct a simulated benchmark to which we compare observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our bench- mark. Our result holds both for non-knowledge-based and, to a lesser extent, knowledge-based startups. This seems surprising since a vast management literature advocates heterogeneous teams. The difficulties associated with workforce heterogeneity (like affective confl ict or coordination cost) as well as "homophily" (peoples inclination to bound with others with similar char- acteristics) hence appear to generally overweigh the benefits of heterogeneity (like greater variety in perspectives or more creativity). We also document that workforces become more heterogeneous over time - startups add work- ers with skills di erent from the workforce at startup. The initial supposedly "poor" mix of workforce characteristics is hence adjusted as the startup ma- tures. This increase in workforce heterogeneity is, however, smaller compared to our benchmark but substantially larger than is team additions had the same characteristics as the initial team members.