It is an intuitively appealing notion that enhanced firm performance i
s associated with agreement by top managers on a fundamental set of st
rategic goals and on methods to accomplish those goals. Nowhere should
this relationship be more pronounced than in new ventures. New ventur
es tend to focus on narrow sets of products or markets; therefore the
range of conceivable goals and methods should be narrower than would b
e 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 establi
shed firms to weather rough rimes. These conditions place an even high
er premium on the need for top management of new ventures to agree on
doing a few things very well. Previous research has evaluated the rela
tionship between performance and top management consensus. Interesting
ly, the results have been mixed and have sometimes contradicted intuit
ion that top management agreement is related to better performance. Wh
ereas previous studies have for the most part examined this relationsh
ip in larger companies competing in stable industries, the study repor
ted here provides findings from newer entrepreneurial ventures in dyna
mic industries. Several important findings emerge from this study. Fir
st, managers' assessment of better performance is not related to agree
ment on a primary set of strategic goals and means. Instead, perceived
better performance is significantly and positively related to disagre
ement on secondary sets of strategic goals and means.(1) Second, power
ful individuals in top management teams have an important impact on th
e nature of the consensus-performance relationship. In new ventures th
e influence of the CEO's perspective and behaviors in forging agreemen
t cannot be overlooked. Third, these results are evident during the ea
rlier life cycle stages of a venture's development, and in dynamically
changing competitive environments. The findings of this study have im
plications for new ventures and the venture capital firms which suppor
t them, and for established corporations seeking to become more entrep
reneurial. Entrepreneurship may be viewed as thriving in a world of id
eas. This study shows a strong correlation between perceptions of supe
rior performance and the presence of idea diversity within top managem
ent teams. The importance of idea diversity in earlier stages of a ven
ture's development is especially interesting and contrasts with the tr
aditional view of new ventures as being highly dependent on adherence
to the founder CEO's initiating vision. The relationships studied here
also provide prescriptive advice for new ventures. Gaining agreement
on all strategic issues by all top managers is not productive. Superio
r performance is not associated with this level of complete agreement.
Attempting to force consensus among all managers on all issues may pr
event important new ideas from being considered. In addition, we surmi
se that valuable firm resources may be used up in attempting to gain a
greement across such a broad spectrum of strategic goals and means: th
eir use in this manner may detract from their application toward other
more substantive organizational issues. Both entrepreneurial firms as
well as established companies seeking to become more entrepreneurial
should find ways to encourage the generation of idea diversity, partic
ularly in the incipient stages of their new ventures. For established
firms simply flattening a corporate hierarchy to create more of an ent
repreneurial type of organizational structure may not be sufficient. I
n this research some of the younger ventures, which presumably enjoyed
the benefits of such structure, did not enjoy the benefits of broad i
dea diversity and performed less well. In established companies the pr
esence of ''corpocracy'' may still overshadow and constrain both initi
ating vision and the subsequent generation of multiple perspectives af
fecting new ventures. These firms should seek to develop and improve o
rganizational communications systems to enhance the production and flo
w of new idea. The generation of idea diversity within start-up compan
ies is particularly challenging. Often founder CEOs have technical bac
kgrounds, but lack managerial experience. They may thus have difficult
y in managing professionals in top management teams to generate divers
ity, and adherence to their initiating visions may also block consider
ation of other ideas. We suggest that firms therefore consider two alt
ernatives to assist in the generation of multiple, challenging perspec
tives within the top management team. First, consideration might be gi
ven to hiring top managers with different industry and company backgro
unds and who have not worked together previously. In addition, hiring
practices might consider more subtle measures of managerial diversity,
such as future time orientation or other cognitive dimensions such as
integrative complexity. Second, new ventures might consider alternati
ves to traditional organization by function. This may include the crea
tion of a position solely responsible for managing planning and develo
ping idea diversity within the top management group. Firms might also
consider rotating functional assignments among top managers in order t
o broaden each manager's perspective. (C) 1998 Elsevier Science Inc.