How Expertise-Based Authority Amplifies the Benefits of Heterogeneity in Entrepreneurial Teams

How founding team diversity translates into innovation remains an unresolved challenge. Although prior research emphasizes integration processes enabled by formal power structures, it provides limited insight into how informal hierarchies operate within entrepreneurial teams to shape innovation outcomes. We focus on expertise-based authority—the informal and collectively recognized right to influence decisions based on domain-specific competence—as a critical contingency influencing whether and when founding team diversity translates into innovation. We theorize that the innovative value of diversity depends on its interaction with expertise-based authority, and that this relationship is further contingent on virtual collaboration and task problem ambiguity. Using two complementary empirical studies—a cross-sectional analysis of startup teams and a longitudinal study of top management teams in high-growth firms—we show that the combination of high diversity and expertise-based authority enables founding teams to achieve superior creativity and innovation performance. These effects are amplified in highly virtual settings and under high problem ambiguity. This study contributes to research on entrepreneurial team innovation by identifying expertise-based authority as an important contingency that conditions the effects of founding team diversity.