NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Are Founder CEOs Good Managers?

Victor Manuel Bennett, Megan Lawrence, Raffaella Sadun

Chapter in NBER book Measuring Entrepreneurial Businesses: Current Knowledge and Challenges (2017), John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar, editors (p. 153 - 185)
Conference held December 16-17, 2014
Published in September 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series Studies in Income and Wealth

We investigate the management practices adopted by firms where the founders are also the CEOs using data from the World Management Survey. We find that founder CEO firms have the lowest management scores of any owner-manager pair type and that this difference is associated with significant performance differentials. We propose three possible reasons for the managerial gap of founder CEO firms: a) informational problems preventing a clear understanding of the weakness of their firms’ managerial practices; b) institutional factors dampening the incentive to adopt managerial practices; and c) non-pecuniary returns to potentially inefficient but power-preserving practices. The findings presented in the paper provide support for a) and c), while we do not find evidence that the management practices of founder CEO firms vary with respect to the characteristics of the institutional environments in which they are embedded.

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This paper was revised on June 1, 2016

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