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Are Founder CEOs Good Managers?

Are Founder CEOs Good Managers?

(p.153) 4 Are Founder CEOs Good Managers?
Measuring Entrepreneurial Businesses
Victor Manuel BennettMegan LawrenceRaffaella Sadun
University of Chicago Press

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.

Keywords:   productivity, management, founder CEOs

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