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Market-Based Solutions to Vital Economic Issues
Research
Oct 26, 2020

Do Founder CEOs Tune Out Their Teams?

Abstract

Founders who possess the entrepreneurial skills to build a new venture may lack the competencies and judgment required to lead their companies through later stages of growth and complexity. As a result, lead investors, shareholders, analysts, and the media frequently pressure founders to either step down or to complement their leadership teams with experienced executives who can compensate for a young founder’s inexperience.

But do founders actually assimilate and leverage the knowledge from the seasoned executives who surround them? Or do they shrug it off and march to the beat of their own drum? To better understand whether founder CEOs incorporate or ignore advice from their leadership team, we collected and analyzed data on more than 2,000 companies that went public from 1997 to 2013, roughly half of which were led by founders and the other half by hired (nonfounder) CEOs. We then examined whether and to what extent founder CEOs tune out their leadership team when making important strategic decisions. This examination uncovered surprising insights relevant for leaders of large and small organizations.


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