Exploring the relationship between functional diversity and growth in VC-backed new technology ventures
Journal of Small Business and Enterprise Development
ISSN: 1462-6004
Article publication date: 27 September 2024
Abstract
Purpose
Despite significant research attention to top management team diversity, the potential influence of other employees’ diversity on venture growth at different maturity stages such as middle management teams and nonmanagerial employees at the base of the organizational hierarchy remains largely overlooked. This study explores this relationship in new technology venture development, with a focus on the influence of functional skills diversity across different organizational levels and maturity stages.
Design/methodology/approach
This study uses a linked employer–employee dataset covering new technology ventures in the digital industry that spans from 2010 to 2020. The sample includes 296 VC-backed new ventures located in the greater Paris (France) area. Through a problem-solving lens, the study examines functional skills at various organizational levels, including 5,243 top managers, 10,274 middle managers and 29,306 nonmanagerial employees.
Findings
Results indicate that placing exclusive emphasis on top-level managers could lead to incorrect assignment of diversity effects as such effects are likely shared with lower organizational levels. In addition, the findings demonstrate that the diversity–venture growth relationship varies across new ventures’ funding stages, with a notably stronger correlation in the late stages of financing.
Practical implications
This study demonstrates that promoting functional diversity across all organizational levels, not just top management, may boost firms’ growth. Furthermore, the effectiveness of functional diversity varies depending on the firm’s financing stage.
Originality/value
This study constructs a multilayered organizational framework to explore the relationship between diversity and new technology venture growth, using a fully reproducible skills diversity classification methodology that is applicable for future investigations.
Keywords
Acknowledgements
We are grateful to Jérôme Vicente, Joan Crespo, participants of the GEOINNO 2022 Conference, two anonymous reviewers and JSBED editor Patrick J. Murphy for helpful comments in this work.
Declaration of interest: We are not aware of any conflicts associated with respect to the authorship and/or publication of this article. This paper did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Citation
Bessagnet, A. and Abreu, A. (2024), "Exploring the relationship between functional diversity and growth in VC-backed new technology ventures", Journal of Small Business and Enterprise Development, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JSBED-07-2023-0293
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited