This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Wasserman, N. Search for Related Content

Founder-CEO Succession and the Paradox of Entrepreneurial Success

Harvard Business School, South Hall 310, Boston, Massachusetts 02163
nwasserman{at}hbs.edu

In the last few decades, we have developed a substantial body of knowledge about CEO succession. However, except for some studies of family businesses that lack direct applicability to nonfamily CEO succession, the past studies of succession have not examined the very first succession event in a firm, when the Founder-CEO is replaced, on a large-scale basis. The critical differences between later-stage succession and Founder-CEO succession include the higher level of attachment between Founder-CEOs and the firms they create, the much larger equity holdings of Founder-CEOs (which give them much more control of the firm), the fact that many Founder-CEOs remain in the firm (even though it is being run by their successors), and the fact that nearly all early-stage succession events involve outside successors (in contrast to later-stage succession research, which has focused on the insider-outsider distinction). These differences make it hard to extrapolate from later-stage succession findings to Founder-CEO succession. Therefore, in order to examine Founder-CEO succession, I used field research and grounded theory building to study the factors that should affect Founder-CEO succession in Internet start-ups. I find that there are two central intertemporal events that may affect Founder-CEO succession: The completion of product development and the raising of each round of financing from outside investors. I develop testable hypotheses about how each of these events affect the rate of succession, and then test these hypotheses using an event-history analysis of a unique dataset containing the succession histories of 202 Internet firms. My findings point to multiple "paradoxes of success" in which the Founder-CEO's success at achieving critical milestones actually causes the chance of Founder-CEO succession to rise dramatically.

Key Words: Entrepreneurship; Founder-CEO Succession; CEOs; Founding Teams; CEO Succession; Top Management Teams; Venture Capital; Entrepreneurial Finance; Private Companies; Information Technologies

This article has been cited by other articles:

				Y. Y. Kor and C. Sundaramurthy Experience-Based Human Capital and Social Capital of Outside Directors Journal of Management, August 1, 2009; 35(4): 981 - 1006. [Abstract] [PDF]

				C. M. Beckman and M. D. Burton Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO Organization Science, January 1, 2008; 19(1): 3 - 24. [Abstract] [PDF]

				M. Hadani Family Matters: Founding Family Firms and Corporate Political Activity Business Society, December 1, 2007; 46(4): 395 - 428. [Abstract] [PDF]

				T. Baker and T. G. Pollock Making the marriage work: the benefits of strategy's takeover of entrepreneurship for strategic organization Strategic Organization, August 1, 2007; 5(3): 297 - 312. [PDF]

				M. L. A. Hayward, D. A. Shepherd, and D. Griffin A Hubris Theory of Entrepreneurship Management Science, February 1, 2006; 52(2): 160 - 172. [Abstract] [PDF]