More than a split: Equity distribution in light of self-concept
The DEMS Management Seminar series is proud to host
Paola Giuri & Mohammad Hawily
(University of Bologna)
More than a split: Equity distribution in light of self-concept
Abstract:
Imagine someone invites you to become a cofounder of their startup. You believe in the idea. You like the team. But before writing a single line of code, talking to your first customer, or even raising your first dollar, one question immediately comes to mind: “What’s in it for me?” More specifically, how much of the company should I own? This is what Hellmann and Wasserman (2017, p. 1) refer to as the “first deal”: the distribution of equity among entrepreneurial team members. Yet, beyond its most immediate function as financial compensation, equity distribution shapes the distribution of influence and power in team decision-making (Knight, Greer, & De Jong, 2020) and serves a deeper function by “attaching” cofounders to their venture and encouraging their sustained commitment (Boeker & Karichalil, 2002; Wiklund, Nordqvist, & Bird, 2013). Indeed, equity distribution is an important driver of team unity (Weissenböck, Breugst, Patzelt, & Dibbern, 2024), influencing what cofounders are willing to contribute to the project when difficulties arise (Breugst, Patzelt, & Rathgeber, 2015). Not surprisingly, then, equity distribution forms an important predictor of startup success (Mueller et al., 2025; Hellmann & Wasserman, 2017). Yet, because determining mutually acceptable equity arrangements is ripe with many challenges, it can also trigger affective conflict that undermines a team’s fluidity (Breugst et al., 2015) and venture termination (Wasserman, 2012). Given these consequences for both entrepreneurial teams and their ventures, understanding how founders distribute equity has become increasingly important, particularly because new ventures are frequently founded by teams rather than individual entrepreneurs (Klotz et al., 2014; Lazar et al., 2020). Accordingly, entrepreneurship research has devoted increasing attention to explaining how entrepreneurial teams arrive at their equity arrangements (Breugst et al., 2015; Hellmann & Wasserman, 2017). A central explanation emerging from this literature is that equity distribution reflects differences in what founders bring to the venture: their ideas, human capital, financial capital, experience, effort, and other resource contributions (Kotha & George, 2012; Kagan et al., 2020; Yan & Zhang, 2025). Although resource endowments have provided a useful lens for explaining these arrangements, following the intuitive logic that what founders bring to the table determines their slice of the pie, this view largely treats equity distribution as a technical outcome of resource contributions. However, the conditions under which founders actually make the first equity distribution are far less clear-cut: before venture formalization, there are few clear performance indicators, no shared benchmarks for determining entitlement, and roles and contributions are still evolving (Alvarez & Parker, 2009; Foss et al., 2019). In fact, empirical evidence shows that differences in resource endowments do not uniquely determine equity allocation structures (Hellmann & Wasserman, 2017). So, the question remains: If resource endowments are such an important driver of equity distribution among cofounders, why can differences in what founders bring to the venture lead to different equity arrangements? Answering such a question remains a critical issue for entrepreneurship research, as equity distribution can be an important driver of team effectiveness and unity, as well as a source of conflict, cofounder exit, and venture disruption. To tackle this tension, we ask how entrepreneurial team members negotiate equity allocation during venture formation. The exploratory nature of the research question requires going into the field and interviewing entrepreneurial team members, including the lead entrepreneur—the individual primarily responsible for initiating and driving the venture formation process—and cofounders—individuals joining the venture as potential ownership partners. We conducted 68 interviews with 13 entrepreneurial teams participating in a business plan competition in one of Italy’s most advanced entrepreneurial ecosystems. Over 27 months, by conducting and analyzing semi-structured interviews with lead entrepreneurs and potential cofounders, we reconstructed these negotiations and developed a process model explaining how equity allocation unfolds. Our analysis reveals a three-stage process. Lead entrepreneurs enter equity discussions with initial perceptions of ownership that are rarely fixed. Cofounders either reinforce or challenge those perceptions. When those perceptions become open to reconsideration, lead entrepreneurs evaluate whether and how to revise their initial perceptions of equity ownership through moral and visionary, self-driven self-understandings. These self-concepts operate either independently or in tandem, and the way they do so shapes how lead entrepreneurs approach equity revisions and interact with cofounders. In the first pattern, lead entrepreneurs enact a moral self-concept, through which recognizing cofounders’ contributions and considering their positions constrain the ownership claims they can justify for themselves. In the second pattern, this moral self-concept is counterbalanced by a visionary, self-driven orientation: lead entrepreneurs recognize cofounders’ positions while also understanding themselves as having a distinct role in driving their venture toward its objectives, placing a different boundary on how far they can revise their ownership claims. Stage three represents the theoretical core of this study. Our main contribution stands in theorizing how self-concept provides an identity-based constraint on how lead entrepreneurs revise equity entitlement. While prior research has shown how founders’ resources and contributions relate to equity distribution (Kotha & George, 2012; Kagan et al., 2020; Yan & Zhang, 2025), we theorize that when initial entitlement becomes open to reconsideration, changes in those contributions do not mechanically determine what founders should claim. Rather, lead entrepreneurs evaluate what they can justify claiming in light of how they understand themselves in relation to their cofounders and the venture. We also extend research on decision-making in entrepreneurial teams (Alvarez & Parker, 2009; Chen et al., 2022). When cofounders are themselves the objects of a decision, new information does not independently determine whether or how that decision is revised. Selfconcept provides a self-evaluative layer between learning from changed circumstances and revising an earlier judgment.
BIO
Paola Giuri is a Professor of Management at the Department of Management, University of Bologna. At Bologna Business School, she is Associate Dean for Full-Time Masters and a member of the Core Faculty. She previously served at the University of Bologna as Research Delegate of the Department of Management, Director of the Department at the Rimini Campus, Director of the Master in Service Management, and Vice President of the School of Economics, Management and Statistics. She holds a PhD in Economics and Management of Innovation from the Sant'Anna School of Advanced Studies in Pisa. During her career, she spent two years as a Visiting Study Fellow at the Science Policy Research Unit (SPRU), University of Sussex.
Mohammad Hawily is a Postdoctoral Fellow in Entrepreneurship at the University of Bologna. His research examines how entrepreneurs select co-founders when forming startup teams and how these choices shape their subsequent entrepreneurial trajectories. Grounded in the view that organizational outcomes originate in individual decision-making, this work sits at the intersection of entrepreneurial cognition and team formation. His research has received international recognition, including a top-five nomination for the Academy of Management PhD Student Best Paper Award in Entrepreneurial Cognition in both 2024 and 2025. It was also featured in Babson’s Research Translation Showcase for its practical implications for entrepreneurial team formation.
The seminar will be held in Room U7-4096.