Entrepreneurial teams perform more effectively if able to choose their own team members or their own ideas – but this benefit to performance disappears if given the autonomy to choose both, according to new research analysed by Linus Dahlander
Companies aim to inspire innovation and entrepreneurship throughout their organisations and among their employees. After all, employees exhibiting these characteristics will be of benefit to the company’s performance in the long run. Previous research has demonstrated that enabling autonomy at work, such as autonomy over day-to-day tasks a sense of ownership regarding work and ideas, and giving employees the opportunity to have a say in how to do their work, fosters creativity, innovation, and entrepreneurial behavior. Individuals with autonomy are subsequently more likely to create unconventional, ground-breaking ideas and novel inventions.
However, it has also been questioned by scholars as to whether granting autonomy truly is the best way to encourage innovation and entrepreneurship. For example, granting complete autonomy to everyone on a team could lead to difficulties when it comes to coordination and causes workplace distractions. The key is to know how and when to employ autonomy.
The concept of autonomy
Although the concept of autonomy has long been at the heart of organisational theory, and research has suggested that autonomy can lead to better entrepreneurial team performance, it has typically been analysed along a single dimension or assumed that autonomy is about giving employees complete freedom. In reality, there are different types of autonomy that could have different effects on performance.
One type of autonomy involves choosing your own team members, or the self-selection of collaboration partners. People who are given the option of choosing their own team members are more inclined to choose people they know over strangers. This can lead to greater familiarity in the team and complementarities in skills, knowledge, and ambition, leading to higher performance. However, there is also the potential danger of choosing friends over better matches simply due to being more familiar with them.
The second dimension of autonomy allows people to self-select ideas or tasks to work on. Autonomy over idea choice provides a different set of challenges than autonomy over team composition. Traditionally, work within organisations is characterised by task division and task allocation, with managers telling employees what work to do. The rationale behind this is to improve efficiency and enable coordination. However, task assignments may also demotivate people and lead to negative consequences for innovation and creativity.
As well as these two separate dimensions of autonomy, there is also the possibility of considering them together. In previous research, it is argued that granting autonomy over both teams and ideas would be complementary and result in increased performance. On the other hand, granting too much autonomy could come at a cost; for example, self-selected team members that are too familiar may be distracted by their social interactions when it comes to generating an idea or working efficiently.
Alongside Viktoria Boss and Christoph Ihl, both from Hamburg University of Technology, and Rajshri Jayaraman, from ESMT Berlin, I investigated exactly how the two aforementioned types of autonomy affect the performance of entrepreneurial teams.
The effect of choosing teams and ideas on entrepreneurial performance
To explore the effect of choosing teams and ideas on entrepreneurial performance, we ran a field experiment. The experiment itself was conducted using students partaking in a lean startup inspired course at a university. The university offers a three-year undergraduate degree in various engineering majors, with business as a minor in the curriculum. All undergraduate students attend an eleven-week mandatory, introductory Business and Entrepreneurship course consisting of weekly 90-minute tutorials delivered by a mentor.
In total, the study involved 939 students on the start-up entrepreneurship course who were organised into 310 teams in which they would develop and pitch a business idea. The level of autonomy the students had depended on which one of four autonomy scenarios they were assigned to
- choosing their team members and idea
- choosing their team members
- choosing their idea, or
- choosing neither their team nor their idea.
Once in teams, mentors then guided students through the development of an entrepreneurial pitch deck: a presentation aimed at hypothetical venture capitalists to secure funding for their idea. Pitch decks were assessed on six criteria by 40 evaluators made up of practicing entrepreneurs, business angels, and venture capitalists. These criteria included; novelty, feasibility, market potential, the likelihood of success, the likelihood of invitation for follow-up, and investment amount. These evaluations formed the basis upon which entrepreneurial performance was measured for each team.
Analysing the findings
Our findings show that teams granted autonomy to choose ideas or team members outperformed teams without the autonomy to choose either, with the effect of choosing ideas being significantly stronger than the effect of choosing teams. However, these benefits were not seen for teams granted full autonomy over choosing both ideas and teams. There are several explanations that can account for the increase in performance for teams granted one of the two types of autonomy, and why this benefit disappears if both are applied.
The autonomy to choose ideas or teams can lead to a better match of ideas with team members’ interests or prior network contacts among team members, respectively. Also, granting individuals a level of autonomy can increase feelings of confidence which can have a motivational effect, up to a point.
If confidence rises above a critical threshold, such as through initial satisfaction and easy triumphs through having your friend on the team or coming up with your own idea, teams can experience overconfidence and exhibit complacency and a lack of focus. This can result in the allocation of insufficient effort in how individuals approach a task. Especially among familiar teammates, there is a tendency toward internal self-assurance rather than paying attention to external task demands and performance standards. This suggests that those in teams able to choose both team members and ideas experienced too much confidence too soon, reducing subsequent effort when it came to the actual task.
These findings are important to the professionalisation of entrepreneurship, particularly incubator and accelerator programs. It is also vital for organisations such as Valve or Github which have experimented with the concept of ‘boss-less’ organisations to provide maximum autonomy for employees. Most accelerators and incubators give aspiring entrepreneurs choice on both the idea and team members. Other companies are reducing autonomy or providing full autonomy for periods of time.
However, our results indicate that granting autonomy solely over choosing ideas would lead to the highest performance outcome and is likely to generate the kind of environment in which better ideas can flourish and lead to more successful entrepreneurial team performance.
In summary, we find that entrepreneurial teams perform better if able to choose their own team members or their own ideas, but this benefit to performance disappears if given the autonomy to choose both. Essentially, once you allow teams the freedom to choose their own idea, a randomly assigned team would perform better than a team where people choose their collaborators.
Linus Dahlander is Professor of Strategy at ESMT Berlin, Director of Research, and the holder of the Lufthansa Group Chair in Innovation. In his ongoing research, he investigates how new ideas and innovations are developed in networks and communities.
