Decision-making in entrepreneurial teams with competing economic and noneconomic goals

Research summary
How should decision-making be organized in entrepreneurial teams pursuing competing economic and noneconomic goals? Using a computational model we examine four decision-making structures—unanimous approval, individual autonomy, majority voting, and lead entrepreneur—and their impact on venture performance when team members hold varied preferences for how to tradeoff economic and noneconomic goals. In slow-changing environments, we find that majority voting generates highest economic performance, while unanimous approval generates highest noneconomic performance. Conversely, in fast-paced contexts, unanimous approval generates highest economic and noneconomic performance. While goal diversity among team members generally reduces economic performance, it enhances economic performance in high-velocity contexts for teams operating under unanimous approval. This study thus highlights the critical role of decision-making structures for the success of entrepreneurial teams. [125 words max]

Managerial summary
How should entrepreneurial teams make decisions when balancing economic and noneconomic goals? We examine four decision-making approaches—unanimous approval, individual autonomy, majority voting, and lead entrepreneur—and their impact on economic and noneconomic performance. In stable environments, majority voting leads to highest economic performance, while unanimous approval excels in achieving noneconomic goals. In fast-paced environments, unanimous approval consistently delivers superior outcomes, enhancing both economic and noneconomic performance. Notably, teams with diverse goals can improve their economic performance in high-velocity settings when using unanimous approval. These findings highlight the importance of choosing the right decision-making structure to optimize performance in varying conditions. For entrepreneurial teams, adapting decision-making processes to the pace of the environment is essential for success. [125 words max]