External Interfaces or Internal Processes? Market Positioning and Divergent Professionalization Paths in Young Ventures

Abstract

We explore how the initial market positioning of entrepreneurial ventures shapes how they professionalize over time, focusing specifically on the development of functional roles. In contrast to existing literature, which presumes a uniform march toward professionalization as ventures scale and complete developmental milestones, we advance a contingent perspective, distinguishing between the development of external interface functions (marketing & sales and customer development) and internal process functions (accounting, human resources, and finance). Specifically, we argue that positioning in an unconventional market space raises demand for external engagement that focuses ventures’ attention and resources toward developing external interface roles. At the same time, such unconventional ventures are less apt to elaborate their internal process roles relative to more conventional peers. We test these predictions using a novel longitudinal data set on the internal organizations of 3,748 U.S.-based entrepreneurial ventures. In contrast to common assumptions of convergent professionalization, our theory and findings advance the perspective that ventures pursue divergent professionalization paths based on their initial market positioning as they scale up. Funding: This research was generously funded in part by a Ewing Marion Kauffman Foundation Dissertation Fellowship awarded to the first author. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.1561 .