Should I Stay or Should I go? Founder Power and Exit via Initial Public Offering

Item Type Journal paper
Abstract

Founders can voluntarily exit their ventures via initial public offerings (IPOs). In this study, we build on power theory to develop and test a model of founder exit using a dataset of 313 founders from 177 entrepreneurial IPOs between 2002 and 2010. We largely find support for the model—a negative relationship between founder power and full exit. To capture the underlying mechanism of the power-exit relationship, we conducted two experiments in which we randomly assigned decision makers to either a high- or low-power condition. We find that decision makers in the low-power condition are more likely to use a full exit via IPO than those in the high-power condition and that frustration mediates this relationship. However, founders can also engage in partial exits, including a managerial partial exit in which the founder leaves management but keeps ownership and a financial partial exit in which the founder divests ownership but remains in management. We find that the negative relationship between founder power and exit is more negative for full exits than partial exits. With this paper, we contribute to the literature on exit by identifying a novel mechanism—frustration—underlying power’s influence on the likelihood and type of founder exit.

Authors Souitaris, Vangelis; Zerbinati, Stefania; Peng, Bo (Grace) & Shepherd, Dean
Journal or Publication Title Academy of Management Journal
Language English
Subjects business studies
HSG Classification contribution to scientific community
HSG Profile Area Global Center for Entrepreneurship + Innovation
Refereed Yes
Date 2020
Publisher Academy of Management
Place of Publication London
Volume 63
Number 1
Page Range 64-95
ISSN 0001-4273
Publisher DOI 10.5465/amj.2017.0420
Official URL http://openaccess.city.ac.uk/21358/.
Additional Information This document is not freely accessible until 25 January 2020 due to copyright restrictions.
Depositing User Prof. PhD Vangelis Souitaris
Date Deposited 28 Jan 2019 16:25
Last Modified 14 Feb 2020 11:03
URI: https://www.alexandria.unisg.ch/publications/256509

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Citation

Souitaris, Vangelis; Zerbinati, Stefania; Peng, Bo (Grace) & Shepherd, Dean (2020) Should I Stay or Should I go? Founder Power and Exit via Initial Public Offering. Academy of Management Journal, 63 (1). 64-95. ISSN 0001-4273

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https://www.alexandria.unisg.ch/id/eprint/256509
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