How Much Do TMTs Matter in Founder-led Firms?

Strategic Management Journal, 40(6), 959-986

43 Pages Posted: 31 Oct 2018 Last revised: 22 Jan 2022

See all articles by Bradley E. Hendricks

Bradley E. Hendricks

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Travis Howell

University of California, Irvine

Chris Bingham

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: January 15, 2019

Abstract

As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding TMT members are viewed as critical resources in helping compensate for the founder’s managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder-led firm’s performance later in a firm’s life. Using novel methods and a sample of over 2,000 firms, we address this gap. We find that although team structure has a significant impact on the performance of non-founder-led firms (consistent with past literature), it has little to no effect on the operating performance of founder-led firms, suggesting that founder CEOs may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress. Taken together, our findings add to the entrepreneurship, team, and research methods literatures.

Keywords: Founders, Top Management Teams, Upper Echelons, Corporate Governance, Entropy Balancing

JEL Classification: L2, M1

Suggested Citation

Hendricks, Bradley E. and Howell, Travis and Bingham, Chris, How Much Do TMTs Matter in Founder-led Firms? (January 15, 2019). Strategic Management Journal, 40(6), 959-986, Available at SSRN: https://ssrn.com/abstract=3269647 or http://dx.doi.org/10.2139/ssrn.3269647

Bradley E. Hendricks (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-3619 (Phone)

Travis Howell

University of California, Irvine ( email )

4293 Pereira Dr
Irvine, CA 92697
United States
8016613377 (Phone)

Chris Bingham

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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