SMITH BRAIN TRUST — Aspiring entrepreneurs want more than a bigger paycheck when they quit their corporate jobs and strike out on their own. New research from Rajshree Agarwal at the University of Maryland’s Robert H. Smith School of Business and two co-authors shows that, more than anything, spinout founders want two things: Creative freedom and equity — a sense of fairness for contributions made.
These are the “pull” factors that motivate spinout founders. But “push” factors also exist, and the research shows that these are more likely to trigger an exit. “The decision to leave the parent firm is often triggered by stifling bureaucracy, bad bosses and strategic disagreements,” Agarwal says.
Firms usually lose more than one high-potential leader when they allow these conditions to fester. “Spinout founders function as ringleaders,” Agarwal says. “They take the best people with them, including many who would never try entrepreneurship on their own.”
The research shows that cofounders who follow ringleaders out the door are often less bothered by push factors, and many want to retain the option of returning to paid employment as a safeguard against entrepreneurial failure. “This explains why many founding teams seek to create unique value propositions, and why they remain reluctant to steal technology from their parent firms,” Agarwal says.
Co-authors for the working paper, “Jewels in the Crown: Exploring the Motivations and Teambuilding Process of Employee Entrepreneurs,” are Sonali Shah and Raj Echambadi at the University of Illinois.
Rajshree Agarwal is the Rudolph Lamone Chair, Professor in Strategy and Entrepreneurship, and Director of the Ed Snider Center for Enterprise and Markets at the University of Maryland’s Robert H. Smith School of Business.
Research interests: Entrepreneurship and innovation at the industry, firm and individual levels; employee mobility and knowledge transfer; business strategy, especially in technology fields; enterprise and markets with a focus on the philosophical underpinnings of upward mobility and value creation.
Selected accomplishments: 2016 Best Paper Award from Strategic Entrepreneurship Journal; 2013 Graduate Mentor of the Year, UMD; 2005 Stephen Shrader Award, Academy of Management Meetings; 2004 Best Paper Award, Academy of Management Journal; 1997 Davis Productivity Award, State of Florida; University Scholar at University of Illinois.
About this series: The Smith School faculty is celebrating Women’s History Month 2017 in partnership with ADVANCE, an initiative to transform the University of Maryland by investing in a culture of inclusive excellence. Daily faculty spotlights support activities from the school’s Office of Diversity Initiatives, culminating with the sixth annual Women Leading Women forum on March 30, 2017.
Other fearless ideas from: Rajshree Agarwal | Ritu Agarwal | Leigh Anenson | Kathryn M. Bartol | Christine Beckman | Margrét Bjarnadóttir | M. Cecilia Bustamante | Rellie Derfler-Rozin | Waverly Ding | Wedad J. Elmaghraby | Rosellina Ferraro | Rebecca Hann | Amna Kirmani | Hanna Lee | Hui Liao | Wendy W. Moe | Courtney Paulson | Louiqa Raschid | Rebecca Ratner | Rachelle Sampson | Debra L. Shapiro | Cynthia Kay Stevens | M. Susan Taylor | Vijaya Venkataramani | Janet Wagner | Yajin Wang | Yajun Wang | Liu Yang | Jie Zhang | Lingling Zhang | PhD Candidates
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About the University of Maryland's Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.