Founder/Chief Executive Officer Exit: A Social Capital Perspective of New Ventures

Posted: 9 Nov 2009

See all articles by Yvonne L. Hinson

Yvonne L. Hinson

Wake Forest University - Schools of Business

Charles E Bamford

University of Notre Dame

Garry D. Bruton

Texas Christian University - M.J. Neeley School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

Several studies have examined the impact of aCEO's exit from the firm on the firm's performance. However, the findingsof these studies are mixed and inconclusive.This research seeks tounderstand the impact on social capital of CEO/founder departure among bothmature and new ventures. The role of social capital within new ventures is explored via pastliterature, as is the impact of social capital losses on new ventureperformance and the ways in which top management teams (TMTs) mitigate theselosses.The researchers propose five hypotheses related to the influenceof founder/CEO departure on new venture performance.Employing data fromthe Sheshunoff BankSearch Database that was compiled from 1996 to 2000, asample (n=798) of performance data from U.S. startup banks iscompiled. The findings of the study indicate significant support for the followingthree hypotheses:(1) firm performance is negatively impacted byfounder/CEO departure; (2) firm performance is negatively influenced byrepeated exits in the CEO position; and (3) the relationship between firmperformance and CEO/founder exit is regulated as the size of the TMTincreases.No support is foundfor the following hypotheses:(1)firm performance will improve if the founder/CEO maintains that position forthe first three years of firm existence, and (2) firm performance will beregulated by the presence of an additional TMT member plus the founder/CEO.(AKP)

Keywords: Social capital, Executive succession, Chief executive officers (CEOs), Banks, Startups, Firm governance, Management teams, Employee turnover, Firm performance, Founders

Suggested Citation

Hinson, Yvonne L. and Bamford, Charles E and Bruton, Garry, Founder/Chief Executive Officer Exit: A Social Capital Perspective of New Ventures (2006). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1502506

Yvonne L. Hinson (Contact Author)

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-5113 (Phone)

Charles E Bamford

University of Notre Dame ( email )

Department of Management
Notre Dame, IN 46556-5646
United States

Garry Bruton

Texas Christian University - M.J. Neeley School of Business ( email )

Department of Management
Fort Worth, TX 76129
United States
817-257-7421 (Phone)
817-257-7227 (Fax)

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