Recent research on nascent entrepreneurial teams reveals that more than half of all teams consist of members with family relationships. This empirical observation is important in itself and at odds with common assumptions about new venture team formation, but the implications of relying on family members for teams have not been examined. This is an important shortcoming in the literature because the nature of the relationships among entrepreneurial team members likely plays an important role.

We examine the relationships among nascent entrepreneurial team members and the effect on performance using social identity theory, which stresses that individuals categorize themselves and others into groups. Arguably, the family is one of the strongest in-group identifications. Thus, entrepreneurial teams with family members have strong ties that bind them together creating effective, cohesive teams, which would result in better performance. Our research avoids the common family/non-family dichotomy. Instead, we examine the proportion of a team consisting of family members, and adopt an inclusive view of families by considering blood relationships and cohabitations separately, arguing that these categories are substantially different.