A Contextualized Transactive Memory System View on How Founding Teams Respond to Surprises: Evidence from China

Entrepreneurs in emerging economies face not only more opportunities but also heightened levels of uncertainties than their peers in developed economies. They, therefore, frequently encounter surprising events arising from rapid and chaotic environmental changes. Extant research, however, provides only sketchy accounts regarding how founding teams respond to surprises. In this study, we propose that founding teams' transactive memory systems (TMS) situated in the unique contextual conditions prevalent in most emerging economies will affect their perceptions regarding how to bridge the knowledge gaps arising from surprises. We test our hypotheses with survey data collected from 137 start-ups in China. Our results suggest that in emerging economies where market supporting institutions are deficient, founding teams with strong TMSs are less inclined to acquire external knowledge but are more prone to improvise in response to surprises than founding teams with weak TMSs. Negative surprises seem to strengthen the above relationships. We conclude by discussing the theoretical and practical implications of this study. Copyright © 2013 Strategic Management Society.