Sorting into Entrepreneurial Teams (Academic research)

Summary

• Multi-owned firms represent about 28% of privately-held firms in Portugal, but account for roughly 40% of total employment and sales.p.10
• Co-founders demonstrate strong positive assortative matching in talent (pre-entry earnings), but feature greater diversity in occupational skill specialization.p.13
• Higher horizontal skill dissimilarity among co-founders is positively associated with firm performance, while vertical talent dissimilarity hurts sales.p.25
• Counterfactual simulations show that removing biased founder exposure increases average economy-wide wages by 6% and aggregate output by 4%.p.7
• The overall economy produces 36% less output than an optimal-assignment benchmark due to combined biased exposure and random search frictions.p.7

Key insights

1. Entrepreneurs sorting into teams are more positively selected on latent worker talent than solo entrepreneurs relative to paid employees.p.6
2. Individuals with unbalanced skill endowments have a higher propensity to form founding teams to compensate for individual skill deficits.p.14
3. Pairs of potential founders with more dissimilar skill profiles are less likely to form a team due to biased exposure and search frictions.p.6
4. Team performance improves when founders share similar high talent levels alongside complementary skill specializations.p.6
5. The outperformance of team-founded firms over solo-founded firms is evident at birth and persists across the firm lifecycle.p.11
6. Founding team departures cause greater firm sales losses when the original team possessed higher initial skill complementarities.p.27
7. Unbiased random partner search fails to eliminate aggregate losses because high-surplus entrepreneurial matches still fail to meet.p.4