New Firm Performance and the Replacement of Founder-CEOs

Jing Chen, Peter Thompson

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    Abstract

    We study the causes and consequences of the replacement of founder-CEOs in a sample of 4,172 Danish start-ups. We propose that founder-CEO replacement is driven in part by mismatches between business quality and founder ability. Our framework suggests that replacements are more likely among the worst- and best-performing firms, with low (high)-ability founders replaced by manager with higher (lower) ability. Replacement is not unambiguously associated with better subsequent performance. Firms that replaced the founder were much more likely to fail, but the surviving firms among them grew considerably faster. Our empirical results are consistent with these proposed predictions. Copyright © 2015 Strategic Management Society.
    Original languageEnglish
    JournalStrategic Entrepreneurship Journal
    Volume9
    Issue number3
    Pages (from-to)243-262
    Number of pages20
    ISSN1932-4391
    DOIs
    Publication statusPublished - 2015

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