Owner Contributions and Equity

Abstract

Given that persons starting new ventures often share ownership with one or more persons (Ruef, Aldrich, & Carter, 2003), determining the distribution of ownership among team members and how members contribute various sources to their startups has become more complicated. Teams are recognized as having larger pools of potential resources, including time, money, ideas, and social connections. For teams to be effective, members must synthesize their shared assets enough to compensate for the extra time and effort that coordination, delegation, and consensus making can take (Aubert & Kelsey, 2003; Erez & Somech, 1996; Faraj & Sproull, 2000). Startup teams differ from top management teams, classroom teams, and work teams because they are typically self-selected, self-directed, and composed of individuals sharing close relationships (such as kinship ties). Prior to the PSED I and PSED II, researchers had little empirical information regarding how startup team members activated their pooled resources to pursue business formation. Now that the two studies are publicly available, information on equity and contributions can be used to address at least four important concerns regarding startup processes in teams: access to resources, helpfulness (willingness to contribute), equality, and role differentiation.