To Agree or Not to Agree? Consensus and Performance in New Ventures

EXECUTIVE SUMMARY It is an intuitively appealing notion that enhanced firm performance is associated with agreement by top managers on a fundamental set of strategic goals and on methods to accomplish those goals. Nowhere should this relationship be more pronounced than in new ventures. New ventures tend to focus on narrow sets of products or markets; therefore the range of conceivable goals and methods should be narrower than would be the case if these firms were competing with many products in diverse markets. In addition, younger companies suffer from a “liability of newness,” and lack the accumulated resources which allow more established firms to weather rough times. These conditions place an even higher premium on the need for top management of new ventures to agree on doing a few things very well. Previous research has evaluated the relationship between performance and top management consensus. Interestingly, the results have been mixed and have sometimes contradicted intuition that top management agreement is related to better performance. Whereas previous studies have for the most part examined this relationship in larger companies competing in stable industries, the study reported here provides findings from newer entrepreneurial ventures in dynamic industries. Several important findings emerge from this study. First, managers’ assessment of better performance is not related to agreement on a primary set of strategic goals and means. Instead, perceived better performance is significantly and positively related to disagreement on secondary sets of strategic goals and means.1 Second, powerful individuals in top management teams have an important impact on the nature of the consensus-performance relationship. In new ventures the influence of the CEO’s perspective