Eric Yuan was not happy at Cisco Systems, even though he was making a salary in the high six figures, working as vice president of engineering on the videoconferencing software Cisco WebEx.
“Every day, when I woke up, I was not very happy,” he told CNBC Make It. “I even did not want to go to the office to work.”
He felt the platform was not evolving fast enough, and saw opportunities in expanding teleconferencing to smartphones and tablets. So in 2011, he left Cisco and founded Zoom, whose value increased astronomically during the pandemic years as it became the go-to app for remote work.
Inadvertent culture replication
Yuan’s story typifies the idea that many people have of the difference between established and new tech companies: the lumbering tech giant vs. the agile startup.
Yet, in our latest paper, co-authored with INSEAD Entrepreneurship Professor Henrich Greve, we find that this demarcation is actually not so clear.
One would think that founders of tech startups who, like Yuan, expressed unhappiness with their previous employers’ work culture would go on to establish companies with very different values.
In fact, more than 50 percent of U.S. tech startup founders have previous experience in other organizations, often in tech giants like Google, Facebook, or Meta. And the work culture of these organizations is not always so easy to shake off when entrepreneurs go on to start their own companies.
We found 30 different cultural elements of companies, such as work-life balance, teamwork, authority, innovation, or compensation-oriented vs. customer-oriented cultures.
We found that, on average, whether they want to or not, founders are likely to replicate the culture of their previous employer in the new venture.
More innovative: a perception that sticks to startups
I initially became interested in this question after conversations with my students.
I found that younger generations are interested in working for startups, which is a very new phenomenon.
I remember that during my undergraduate years, most of my contemporaries in tech fields wanted to work for an established company. Today, my students tell me that they want to work in a more creative, innovative environment — something they associate with startups.
But is that perception true?
That was the initial question I had in my mind.
Three conditions that predict a transfer of a company’s work culture to another one
Though previous research has shown that startup founders transfer knowledge or work routines from previous jobs, we are the first researchers to present empirical evidence that they also transfer work culture.
Three conditions favor such a transfer.
The first is, predictably, that the longer founders have been at another organization, the more likely they are to transfer the culture to their new operation, because they have become very familiar with that culture.
Second, the more internally coherent the parent organization’s culture is — and thus, the ease with which it can be understood and learned — the more likely it is for founders to continue these elements in their new company.
And third, the more atypical a parent organization is — the more it stands out from others in its field — the more likely it is that its culture would be transferred to the “child,” or “spawn,” organization.
In the third case, in an atypical culture, it is easy to identify cultural elements and explain them to employees, and for them to remember and incorporate them. Workers in an atypical culture tend to identify [personally with an atypical] organization’s culture more, which would increase the learning of the culture.
So, ironically, the fact that a parent organization’s culture is unique makes it more likely to be copied by a spawn organization, according to the authors’ research.
Founders usually say that their culture is unique. However, we actually found that’s not necessarily the case. They tend to replicate the culture of their previous employers, even if they don’t want to, because they’re accustomed to that way of working.
Methodology
We identified startup founders, and used their LinkedIn profiles to determine companies where they had previously worked. The team applied natural language processing to text from Glassdoor, a site that allows current and former employees to anonymously review companies. They used this information to characterize the cultures of the established (“parent”) and startup (“child”) companies they were comparing. They also identified a “twin” of the child organization: one with a similar size, number of years in business, product, etc.
They then compared how similar both this control company and the child organization were to the parent company. If the child company was more similar to the parent than the control organization, this supported the hypothesis that founders tend to transfer their previous work culture to their new venture.
Practical applications
Tech founders, especially those who disliked the work culture of previous employers, might find it instructive that they are likely to replicate this culture, despite themselves. Job seekers who are seeking unique or innovative cultures may also find it useful to know that startups do not necessarily have a work culture that is different from established tech companies.
