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In the following, the influence of founder identity on firm exit is hypothesized to arise from the firm strategy that founders adopt. Specifically, I link the three identity sub-dimensions used in prior work, frame of reference, basic social motivation, and self-evaluation (Brewer & Gardner, 1996), and interweave them with the well-established strategic core decisions of entrepreneurship, the target market to address, the customer problems to solve, and the resources to generate a market

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offering (Abell, 1980). These decision aspects are used in the present study as they operated as basis to establish the immediate bond between founder identity and his or her strategic actions (Fauchart

& Gruber, 2011).

Mavericks

This study hypothesizes that firms established by founders who are inclined to a maverick identity are less likely to exit for three reasons. First, maverick-like founders are focused particularly on competition (Fauchart & Gruber, 2011). They regard competitors as the frame of reference, and in order to differentiate from rivals, they align their strategic actions to securing firm success and displacing competing firms. Since defeating rivals is a core aspect of the firm’s strategy, business opportunities are developed and selected accordingly, even when competition is fierce. For example, although in the information technology (IT) industry, incumbents’ proprietary market offerings restrict the development activities of new entrants and limit customer benefits, entrepreneurial activities dominate (Graham & Mowery, 2003, Ziedonis, 2004). Consequently, as competition is a strong reference point, mavericks develop a culture aimed at generating a market offering that differentiates them from the competition. This created uniqueness provides their firms with competitive advantage (Barney, 1986; 1991). As a side effect of creating this viable product or service, mavericks’ actions are streamlined early on in the process and facilitate effective decision making, thereby increasing the firm’s survival chances in the market.

Second, founders who are highly socially motivated by self-interest, pursue goals such as firm success and profit (Fauchart & Gruber, 2011). These founders can be expected to be adept at mobilizing resources and allocating them carefully based on their goals. Skillful resource allocation is argued to have beneficial effects for entrepreneurial endeavors, especially in the early stages of a venture (e.g. Aldrich & Fiol, 1994; Lounsbury & Glynn, 2001).

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Third, with regard to the sub-dimension of identity, self-evaluation, maverick-prone founders tend to be less concerned about accepted norms and practices. They abandon the standardized ways of doing things and adopt new ways of thinking (Sternberg, 1985; Ward, 2004) thereby enhancing the creative space (Amabile, 1996) and opening up new possibilities for entrepreneurial action. This is especially important when entrepreneurship is linked to the promotion of technological change and innovation since entrepreneurs have to overcome (social) boundaries and act in ways that disrupt the market (Schumpeter, 1934). Nonconformity and refusal of accepted practices have been found to have positive influence on organizational innovation (e.g.

Shane & Venkataraman, 1996) and firm foundation (e.g. Powell & Sandtholtz, 2012; Zhang &

Arvey, 2009). A tendency to bend or change the rules of the game can lower exit rates because overcoming entrepreneurial challenges requires new, unconventional ways of thinking and actions beyond what is morally acceptable (Schumpeter, 1975; Brenkert, 2009).

Thus, taken together, I hypothesize that

Hypothesis 1: Founders with a stronger maverick identity exhibit lower exit rates.

Missionaries

Missionary-prone founders can be expected to have higher exit rates. Given that society functions as their frame of reference, they aim to develop a market offering with a social impact.

However, this can be problematic for various reasons. Past research shows that missionaries tend to target markets that lack business potential since they aim to serve needs for public goods (Weisbrod, 2000) or commercially unattractive customer needs (Nelson & Krashinsky, 1973).

Moreover, they pursue missions where public benefit is more important than monetary payback (Austin et al., 2006; Fottler, 1981; Paton, 2003).

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Hence, despite the challenges related to creating competitively attractive market offerings, missionaries still pursue their development because these founders are less concerned with the development of a business idea that makes their firm a viable organization, and more interested in generating a market offering that benefits society as a whole.

Second, missionaries’ social motivation to improve the world puts them in tension with respect to resource procurement. Since their mission of world salvation is emphasized over profit, resource providers such as potential investors and employees but also customers are hesitant to become involved in missionaries’ ventures since the financial returns are in doubt (Herman et al., 1993). This amplifies the liability of newness effects from which young firms typically suffer (Stinchcombe, 1965). For instance, not having affiliates in the early stages is detrimental to the firm’s viability because it hampers access to further financial and social capital (Stuart et al., 1999).

Consequently, the liability of newness effects are stronger for firms founded by missionaries (Desa

& Basu, 2013). Additionally, accessing financial resources can be problematic for missionaries if receiving external funding is contingent on eligibility requirements or external decision makers adjusting the mission (Korosec & Berman, 2006; Brown & Moore, 2001). As noted earlier, strategically accessing and mobilizing resources is a key activity in firm survival, for instance winning key affiliates and securing investment capital (Bruederl et al., 1992, Stuart et al., 1999).

However, missionaries are at risk of lacking the tangible and intangible resources to pursue their mission (Desa & Basu, 2013). Moreover, the vision of working towards the greater good can lead to overshoot expectations. Equivalent to the hubris effect (Hayward & Hambrick, 1997), missionaries are prone to misinterpret or unrealistically assess the entrepreneurial situation by ignoring the downsides of their entrepreneurial endeavors such as unattractive target market and lack of opportunities.

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Finally, for missionaries’ self-evaluation, acting socially responsibly is crucial. Their intention is to make the world a better place, and hence, breaking with rules and norms is against their maxims. Missionaries’ moral standards require them to act accordingly even if this limits the scope of their entrepreneurial action. This is because rules cannot comprise all contingencies, and particularly in dynamic, competitive environments such as entrepreneurship, acting outside of the accepted norms, and breaking with the rules are inevitably linked to creativity and are required to generate change and innovation (Brenkert, 2009). However, creativity is strongly associated with opportunity discovery (Baron, 2006) and entrepreneurial action (Amabile, 1997; Ward, 2004), particularly as firm founders typically face unforeseen situations and challenges. Based on these three rationales I posit that:

Hypothesis 2: Founders with a stronger missionary identity exhibit higher exit rates.

Masterminds

Founders inclined towards a mastermind identity show lower exit rates for three reasons.

First, masterminds’ frame of reference is a community to which they feel a belonging.

Consequently, market offerings that are created in mastermind firms are targeted at satisfying the needs of the community. Since beliefs and values are shared within a community (Tajfel & Turner, 1979), masterminds are aware of members’ requirements and likely have similar demands, and similar problems with existing market offerings like products or services. As a result, when masterminds develop their business ideas, they respond to the community members’ needs and problems. Users are an important source of innovation for firms, particularly in relation to the identification of sophisticated needs ahead of a trend, and the development of potential solutions to address those needs (e.g. von Hippel, 1986). Their solutions and entrepreneurial opportunities are

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new compared to existing products and services, and exhibit market potential (Lilien et al., 2002).

Both aspects can contribute crucially to the firm’s viability since they represent important features of sustainable, competitive advantage (Barney, 1986; 1991). The developments generated by individuals associated with communities tend to be innovative, a phenomenon that is evident across several industries and professions including librarians (Morrison et al., 2004), sports equipment industry (e.g. Franke & Shah, 2003), and open software development (e.g. von Hippel & von Krogh, 2003; Alexy & Leitner, 2011). Prior work has shown that their entrepreneurial activities resemble a trial and error process (e.g. Lee & Cole, 2003) that they have potential for firm creation (Shah & Tripsas, 2007). Knowing about user needs and potential technological solutions introduces business-relevant effectiveness into the entrepreneurial process. Masterminds are able at an early stage to develop market offerings that are clearly targeted to a particular group and which can be beneficial to stay in the market.

Second, as masterminds strongly identify with the group and its members’ values, supporting and being supported by the community is core to their social motivation. Since they are able to support their fellows in their entrepreneurial activities, masterminds receive reciprocal help from the community. Thus, peers represent a highly valuable network, and the resources of the community are an important source of innovation and prototyping activities (e.g. Franke & Shah, 2003; Lee & Cole, 2003). Since community members can be mobilized to support the development of new market offerings and serve as pilot customers to test products or service features before market launch, masterminds reap substantial benefits for entrepreneurship which increase their efficiency and the firm’s viability.

Third, mastermind-prone founders’ self-evaluation depends on the extent to which they are able to contribute to their community. Being an asset to the group matters, particularly as being

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valued is important for these individuals’ self-worth and feeling of belonging (Hogg & Terry, 2000). Hence, masterminds aim consistently to provide their peers with beneficial market offerings in order to win their appreciation; hence, maintaining their business is important for their identity.

To achieve this, masterminds thrive to improve their skills and capabilities through learning. In turn, learning, for instance in the form of probing, provides masterminds with important information advantages in relation to technological developments and their viability (Autio et al., 2013). In other words, masterminds learn earlier about the existence and quality of a business opportunity which decreases their exit rates.

Hypothesis 3: Founders with a strong mastermind identity exhibit lower exit rates.

DATA AND METHOD

This section describes the empirical setting and the dataset used to test the hypotheses, and introduces dependent and independent variables and methods.

Empirical Setting

Survey data were collected through an online questionnaire administered between May and July 2012 to members of so-called hacker- and makerspaces. Hacker- and makerspaces are communities of individuals who share an interest in technology, computing, science, art and the hacking culture in general, and where free flow of information, transparency, and learning represent core values (Coleman & Golub, 2008). An initial subscription and voluntary fee payments allows access to these communities which typically offer physical workspaces equipped with machinery such as 3D printers, laser cutters, computer numerically controlled machines, and tools such as hammers and saws, for shared use. While these workspaces can be physically located in warehouses, basements, or community centers and facilitate cooperation, socializing, sharing of

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ideas and resources, most hackerspaces are represented by virtual collaboration. On joining a hacker- and makerspace, an individual is included in an email distribution list which allows exchange of various information on needs or problems, solutions and ideas related to hacking projects.

Hackers and makers are individuals who engage in development and problem-solving activities, thereby not only modifying the work of others but also creating new solutions, products, services or artifacts (Lang, 2013; Aldrich et al., 2014). These activities are pursued individually, within and across hackerspaces, and typically motivated by curiosity and personal interest, and range from writing code and programming to the development of products, drones, robots, and public performances in association with light installations, music, or fire. Hackers typically are well-educated or are pursuing a degree or higher degree course (Lakhani & Wolf, 2005), and rather than working in organizational hierarchies prefer occupations that allow personal freedom including entrepreneurship (Carlson, 2011).

The context was chosen to investigate the research question because it represents a setting where all the required variables coexist thereby constituting three major benefits. First, hackers and makers engage in diverse kinds of entrepreneurial activities, including but not limited to opportunity discovery and exploitation. This is especially beneficial for an analysis of exit rates, because not all discovered opportunities result in the creation of firms; thus, it is possible to study firm exit conditioned on the transition from opportunity discovery to entrepreneurship.

Second, hacker- and makerspaces are beneficial for investigating identity because their members represent a reasonably homogeneous population that can be observed within a community with distinct boundaries. This allows the collection of data on fairly comparable individuals, whose main values and ideologies are shared and the community norms are institutionalized. A more

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diverse community would likely introduce a higher degree of heterogeneity across participants and potentially produce more biased results. This setting offers major advantages to this respect and responds to calls in entrepreneurship research for settings that include entrepreneurs and non-entrepreneurs who are fairly comparable individuals (Shane & Khurana, 2003).

Third, although hackers and makers share some basic features, there is substantial heterogeneity with respect to founder identities. Since the setting represents a particular community of hackers and makers, it is possible to single out differences across identities within the overall community. This allows observation of key aspects of identity that lead to individual differences on different identity dimensions, such as the social motivation underlying their entrepreneurial activity.

Data Collection and Final Sample

An iterative process, and a combination of field observations, interviews and test studies was used to achieve ex ante insights into the setting (Brewer, 2000; Barley & Kunda, 2001) and facilitated derivation of an appropriate research design. The survey was designed based on single- and multiple-choice questions, and divided into firm-level and individual-level information including demographics, motivations for hacking, and entrepreneurial engagement. The questionnaire was tested in several offline and online pilots.

The data were collected in three steps. First, the administrator of a worldwide hacker and maker consortium⁸ marketed the survey on three social media platforms to gain reliability within the hacker community because the field observations showed that trustworthiness would be a crucial condition for participation in the survey. In the second phase, emails were sent to hacker and makerspaces in the United States, Canada, Australia, New Zealand, and Northern and English and

8 This consortium is the biggest conglomerate of hacker and makerspaces worldwide and was thus, selected for this study

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German speaking Europe. The spaces were selected based on a) their registered status (active or non-active), b) their accessibility, c) their website claims about their purpose and intentions, d) their conditions of membership. Emails were sent to 392 communities and community organizers asking for the survey to be distributed across the spaces. Among these communities, 5.86% could not be reached, leaving 369 hacker and maker spaces; reminders were sent after 10 days.

Imposition of a response time window of 7.5 to 90 minutes on the 2948 clicks of individuals registered on the survey platforms, produced a final sample of 678 respondents. This time window was chosen based on response time measured in the pilot surveys. Respondents not meeting these requirements were assumed to have visited the platform out of curiosity and were excluded from the analyses.⁹

For the investigation of entrepreneurial identities, the final data set includes individual- and firm-level information including firms’ market entry and exit dates. In the final sample, 76.6 percent of individuals work on developments related to information technologies, and 43.8 percent of individuals have firm founding experience. In terms of demographics, the sample is characterized by a mean age of 32.9 years, and an overrepresentation of males (498 male versus 57 female respondents) and singles with a 39.52 percent rate.

To check the representativeness of the final sample, various tests were conducted with respect to the demographic dimensions of age and gender as well as the distribution of respondents across hackerspaces and regions. The final sample appears to correspond to the characteristics of the overall community and with research in similar settings (e.g. Lakhani & Wolf, 2005; Jeppesen

& Lakhani, 2010). Although, the distribution of the entrepreneurship rate across regions is in line

9This choice was investigated by relaxing the minimum time threshold to 8.5 minutes and 10 minutes but keeping 90 minutes as the maximum time. An individual taking more than 90 minutes would seem to indicate gaps in responding which could bias results. With both alternative specifications, the main results hold.

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with the Global Entrepreneurship Monitor (GEM) 2013 report (Amoros & Bosma, 2014), there is indication that hackers and makers have a higher proclivity for entrepreneurship than the general population, which suggests that the findings may not reflect a representative individual. The results did not change for the checks for potential bias based on hackerspace affiliation or region.

Measures

Dependent variable

The dependent variable exit, is a dummy variable that takes the value 0 if the firm did not exit the market within 3 years and 1 otherwise. In this study, exit relates to closure of the business (Yang &

Aldrich, 2012). The exit variable was generated based on the questions “When did you (co-) found your most recent company?” and “When did you close down your most recent company?”.

Consequently, there is no strong reason to believe that the variable would capture an exit route other than business termination, for instance exit through buyout.

Explanatory variables

To generate the explanatory variables, I follow prior work in entrepreneurship research and use previous studies as conceptual guidelines to create and mark the domain of these variables (e.g.

Brown et al., 2001). Founder identity is based on three sub-dimensions (Brewer & Gardner, 1996) which provided guidelines to generate the scales of the founder identity variables. I conducted principal component factor analyses to operationalize the variables based on the underlying three-dimensional structure of: a) basic social motivation, b) self-evaluation, and c) frame of reference.

Hence, each factor analysis was based on three survey items, one item for each aspect of identity. In this way, overall nine questions, which were measured on a Likert scale from 1 (“Strongly disagree”) to 7 (“Strongly agree”), were used for the factor analyses supplemented by the application of the Kaiser (1960) criterion and varimax rotation.

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Each factor represents a founder identity variable, 1) maverick identity, for rather reckless founders with an affinity for competitive behavior, 2) missionary identity, for founders engaging in entrepreneurship primarily in order to make a contribution to society, and 3) mastermind identity, for more curious, community-oriented founders active in problem-solving. Importantly, these are not mutually exclusive categories. In this respect, the operationalization of identities departs from Fauchart and Gruber’s original founder identity typology (2011) and refers specifically to their additional finding that beyond pure types, identities can blend in the sense that so-called hybrid identities can occur. To explore this remarkable finding, allowing more degrees of freedom is crucial and therefore, in the present study scales representing a continuum along which individuals can vary, are applied. Using factor analysis to create the variables is particularly beneficial because it increases our understanding of the cross-correlations with multiple variables in the data set. An overview of the items used per identity dimension is presented in Table 1, descriptive statistics and factor loadings are presented in Table 2.

--- Insert Tables 1 and 2 about here --- Control variables

The control variables are basically categorized as individual or firm and industry-related.

Individual level controls

Identity is associated with actions, beliefs, and motivation (Hogg & Terry, 2000). Thus, individuals’ particular goals and the motivations that drive their entrepreneurial actions might be relevant for an analysis of different types of identity. The dummy control variable goal orientation is generated based on the question “I am someone who is motivated by goals” taking the value 1 for

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“Strongly agree”, “Agree” “Weakly agree” and 0 for “Strongly disagree”, “Disagree” and “Weakly disagree” and “Neither nor”.

The controls for extrinsic motivation and intrinsic motivation were created based on factor

The controls for extrinsic motivation and intrinsic motivation were created based on factor