344 ENTREPRENEURSHIP
accorded high levels of discretion by the CEO—tend to follow strategies that stick to the
well-known path and achieve performance levels close to industry averages.^15
As the company grows, the needs of the venture change and so do the requirements
for the TMT. Sometimes a TMT consists of only two people, though this is more com-
mon at the launching of the new venture. Street Story 9.1 provides some examples and
insight into the recruitment of a second entrepreneur.
Money is frequently a reason for recruiting TMT members. The entrepreneur in search
of financial partners usually allows these partners to sit on the board of directors or work
on the TMT. Connections (business, social, and technological) are also good bases for
choosing members of the TMT. These people help the new venture acquire or gain access
to new resources that would otherwise be out of reach for the emerging business.^16Cultural Diversity. A final set of criteria address the potential need for demographic
and cultural diversity. Because background and environment are major influences on
individual perceptions and orientations, people from different demographic and cultural
groups have different viewpoints. These differences, when expressed and processed by
an effective group, can form the basis for a wider understanding of the firm’s own envi-
ronment. Each separate contribution adds to the firm’s knowledge of its customers,
employees, markets, and competitors, and to its awareness of factors in the remote envi-
ronment. It has even been suggested that TMTs should be composed to match the con-
ditions of environmental complexity and change. Recent research has suggested that
homogeneous TMTs tend to perform better in stable environments and heterogeneous
TMTs perform better in rapidly changing environments.^17 Therefore, because entrepre-
neurs most often operate in rapidly changing environments, a heterogeneous team
should be most effective.
However, achieving the benefits of diversity is not easy. Some cultural groups, like the
Japanese, fret about having to work with people of different cultures. They often attrib-
ute their success to their cultural and racial uniformity. American managers, on the other
hand, have more experience in diverse situations. Recent integration of European mar-
kets has made Europeans more sensitive to the power of diversity. European firms are
now looking for people who are Euro-managers, able to work well within any of the dif-
ferent cultures and ethnic communities in the European Union (EU).^18
A recent study shows how diversity works.^19 Groups of students were formed to do
case analyses in a Principles of Management course, four case studies over the semester.
About half the groups were composed of white males and the other half were racially
diverse (gender, ethnicity, national origin). The homogeneous groups performed better
at first, but the diverse groups had just about caught up by the end of the semester. The
diverse groups took longer to figure out how to work effectively with each other, but
their rate of improvement was higher and “by the end of the experiment, the diverse
teams were clearly more creative than the homogeneous ones, examining perspectives
and probing more alternatives in solving the final case study.”^20 The study’s senior author
said that he believes that if the experiment had lasted longer, the diverse groups would
have passed the others in overall performance.^21 In the real world of new venture cre-
ation, TMTs are expected to last significantly longer than one semester. Therefore, the
long-term benefits of a diverse TMT can be achieved.