Jewels in the crown: Exploring the motivations and team building processes of employee entrepreneurs

Research Summary: This study examines motivations and team building processes of employee entrepreneurs in the disk-drive industry. Our inductive, grounded theory building approach uncovers that ringleaders—founders who spearhead spinout creation—are driven by a nonpecuniary desire to create in a fertile environment, when they encounter frictions within the parent firm. Cofounders share the desire to create, but ensure departure on good terms to retain the option of returning to paid employment as a safeguard against entrepreneurial risk. We uncover an endogenous team building process in which more successful founding teams engage in “workplace instrumentality”—creating workplaces through deliberate selection of cofounders who have complementary functional knowledge, but are similar in that they possess superior problem-solving abilities, best-in-class talent, and common workplace values. Managerial Summary: The paper examines the motivations and founding team building processes of individuals who leave existing firms to create new ventures. In contrast to conventional wisdom that suggests preformed teams working on innovation projects leave together, we find founding teams are created when a “ringleader” chooses to venture out and subsequently seeks out cofounders. Ringleaders and cofounders alike are motivated by a desire to create given fertile opportunities and care deeply about equity, but ringleaders additionally experience at least one organizational push factor. Almost all founding teams are created to ensure the presence of complementary, functional knowledge. However, more successful spinouts also select cofounders who are hands on problem-solvers, best-in-class talent, and who share common workplace values.