Can cognitive biases explain venture team homophily?
Strategic Entrepreneurship Journal · 2009 · Volume 3 · Issue 1
Abstract
Although venture teams whose founders are dissimilar (heterophilious) tend to outperform teams whose founders are similar (homophilious), most new venture teams are characterized by homophily. I try to explain this puzzle with a learning model in which founders are prone to two cognitive biases: overoptimism and self-serving attributions. Founders choose cofounders with similar beliefs as themselves because they expect this to promote the most effective allocation of effort to the venture. Self-serving bias reinforces and perpetuates these beliefs. In principle, informed outsiders (e.g., practitioners or hands on investors) can improve venture team composition compared with private choices by founders. Copyright © 2009 Strategic Management Society.
Keywords
optimism, self-serving bias, venture teams, homophily
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