Title

Impact of Venture Capitalists on Founder Turnover: Implications for Firm Governance

Status

Faculty

School

School of Economics and Business Administration

Department

Management and Entrepreneurship

Document Type

Article

Publication Date

2016

Publication Title

Strategic Management Quarterly

Description/Abstract

Prior literature tells us venture capitalists(VCs) are responsible for ousting founders from their leadership positions and replacing them with professional management around initial public offering (IPO) time. This argument assumes all founders are equally incapable of running a company beyond the initial startup phase. We question that assumption and propose that the relationship between VC involvement and founder-CEO turnover around IPO time is moderated by other variables such as the pre-IPO performance of the firm, the nature of the involvement of the VCs, and the prior experience of the founder-CEOs. Our hypotheses are tested on 108 founderCEOs of IPO firms and supported to a large extent. Contrary to the conventional view that VCs are primarily perceived as driving forces behind replacement of founder-CEOs with professional managers, this study demonstrates that there is, in fact, a much more complicated and dynamic relationship between VCs and founders of IPO firms. We provide evidence that there are certain factors that induce VCs to replace founder-CEOs and other factors that constrain or facilitate their ability to do so.

Keywords

corporate governance, venture capitalists, founder turnover, professional management, founder-CEO succession, young ventures

Volume

4

Issue

2

First Page

11

Last Page

28

Peer Reviewed

1

Scholarly

yes

DOI

10.15640/smq.v4n2a2

Disciplines

Business | Business Administration, Management, and Operations | Economics | Entrepreneurial and Small Business Operations

Original Citation

Aksu, B. (2016). Impact of Venture capitalists on founder turnover: Implications for firm governance. Strategic Management Quarterly, 4(2), 11-28. doi: 10.15640/smq.v4n2a2

This document is currently not available here.

Share

COinS