Two’s Company: Directional Diversity and Performance of Entrepreneurial Pairs Alex Coad Bram Timmermans August 29, 2012 ”PRELIMINARY AND INCOMPLETE VERSION FOR WORKSHOPS DEADLINE – DO NOT CITE, DO NOT QUOTE, DO NOT DISTRIBUTE” Abstract We study the effects of diversity on the survival and growth of new ven- tures using the Danish Linked Employer-Employee database. To get cleaner measures of diversity, we focus on entrepreneurial dyads, and also investi- gate the asymmetric effects of ‘directed’ diversity by distinguishing between the ‘primary’ and the ‘secondary’ founder. We complement existing work by showing that diversity depends on the asymmetric hierarchical structure within the team, and that a unidimensional diversity indicator (which is usu- ally applied) fails to capture a number of performance effects of diversity. Ventures with a STEM-educated primary founder and a Business-educated secondary founder have high employment growth, while the opposite com- bination (Business first, STEM second) has low employment growth. Pairs of younger individuals have lower survival chances but higher employment growth. Performance of mixed-race and mixed-gender ventures depends upon the identity of the primary founder. Family firms have lower employ- ment growth. JEL codes: L25, L26, J21 Keywords: Diversity, Entrepreneurial Teams, Survival, Growth 1