Profitability type II, the third milestone, measured whether the NET monthly revenue not only exceeds the monthly expenses but also includes the owners’ salaries. The results suggest that demographic diversity and familiarity have a significant effect on achieving this milestone. The results showed that age-heterogeneous NETs are more likely to achieve profitability type II compared to less heterogeneous ones, as suggested by cognitive resource perspective, which argue that heterogeneous compositions are linked to positive outcomes as these type of teams are more likely to produce operational synergies (Vogel et al., 2014).
Previous findings have demonstrated that diversity in age increases team effectiveness, as older people offer teams with more mature opinions while younger team members contribute to the team with fresh insights (Tsui et al., 1992; Horwitz, 2005). As a result, age-diverse teams are presumed to bring more information and opinions that enrich the decision making process (Williams and O'Reilly III, 1998). This study shows that NETs in the US benefit from age diverse compositions, just as Kearney et al. (2009) found in German teams from established organisations. However, the predominance of age- homogeneous teams in this study suggests there is a tendency to avoid starting an age- heterogeneous team which restricts their probability of reaching a more economically stable status (i.e. profitability type II). Thus, this thesis agrees with Kearney et al.’s (2009) recommendations on taking actions that mitigate conflict to enable a fruitful and effective communication in age-diverse compositions.
Teams that are outside the copreneurial arrangements are more likely to achieve the third milestone when compared to copreneurial efforts. This is a significant finding, as NETs formed by family, friends and colleagues are 2.5 times more likely to achieve profitability type II compared with NET formed by husband and wife or partners living together. Even though Brannon et al. (2013) argue that copreneurial efforts enjoy flexibility as an advantage which enables them to acknowledge each other’s strengths and weaknesses thus working together effectively to achieve their first sale, this advantage doesn’t work the same way when teams are trying to move beyond making the first sale to make profits that allow the owner salaries to be paid from the revenues they make through their sales. In addition, it could be argued that when copreneurs work in
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partnership, the extra pressure that makes the owners to draw their salaries from the business profits is less when compared to teams where members are expecting to receive payments for the work they put into the business. The finding that copreneurial teams have lower tendency to make profits from the business can also be explained by the practice of re-investments from profits by copreneurs who are interested in long-term benefits over achieving short-term benefits (Brannon et al., 2013). These findings add to D’hont et al.’s (2016) conclusions derived from their study of entrepreneurial teams in Paris where they explained the strong relationships between the friends and colleagues and the venture development. They found that teams formed by friends and colleagues benefit the start-up as long as the interaction among members is guided by affection. According to this explanation, the NETs formed by friends and colleagues who prioritise their relationship over the process of founding a business can benefit from the intrinsic advantages to the relationship such as trust (Kim and Aldrich, 2006), communication (Hinds et al., 2000), empathy and sympathy (D'hont et al., 2016) which enables the team to reach profitability type II.
Even though age and familiarity have a significant effect on achieving the third milestone, thus giving the owners the opportunity to make profits from their business, none of the compositional constructs had a significant impact on the time taken to achieve this milestone: the time it takes for the owners to make their first salary from the business. The results of the multiple linear regression models indicate that diversity rather than homogeneity helps NETs to make their first salary within a short space of time from the business start-up. This suggests that, NETs with heterogeneous compositions are more productive, as suggested by rational process models, which argue that NETs are more efficient given the advantages of complementarity (Aldrich and Kim, 2007; D'hont et al., 2016), resource availability (Forbes et al., 2006), contrasting ways of thinking (Vogel et
al., 2014), creativity (Alesina and La Ferrara, 2005; Hoogendoorn and Van Praag, 2012),
and operational synergies (Wright and McMahan, 2011).
To summarise, the evidence so far suggests that new teams require alternative compositions at different times, depending on the outcome of interest. To achieve the first sale, NETs with a gender-heterogeneous, resource heterogeneous, ethnically homogeneous and education-homogeneous compositions offer favourable conditions.
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For profitability type I, none of the compositional constructs showed a significant effect although the coefficients indicate that homogeneous compositions in general benefit the start-up effort when start up success is measured by whether or not they make some profits from their sales. NETs that are age-heterogeneous and whose members are family, friends and colleagues are more likely to achieve profitability type II. As for the time taken to achieve the three success dimensions, the NET compositions studied in this thesis were found to be less effective in making success predictions. Yet, this thesis supports the dual effect of composition diversity in NETs in the US, which agrees with the conclusions of Schjoedt et al. (2009): “While the entrepreneurial teams need to be heterogeneous it also needs to be homogeneous in terms of composition for it to function” (p.516).