Birds of a feather start flocking together: disentangling the effect of competence base depth and breadth on start-ups’ expected performance

A firm’s competence base is considered an important driver of its performance. For start-ups, such competence base coincides with the aggregate of the knowledge, capabilities and expertise of theirs founders. To successfully compete in the market, such competences need to be both heterogeneous and advanced. However, we theorize a trade-off between a start-up’s competence base degrees of depth and heterogeneity. In addition, since heterogeneous competences imply a certain diversity of background, perspectives and education among start-ups’ cofounders, these may produce conflict and misunderstandings that may damage a start-up’s expected performance. Thus, we contend that the established positive effect of advanced competences on expected performance is partly due to a lower degree of competence heterogeneity. We test our model on a large-scale sample of 1690 start-ups and find support for our hypotheses. Our results suggest that, at least in the first moments of a start-up’s life, competence heterogeneity would be better to be limited.