Founder Turnover in Venture Capital Backed Start-Up by Martin Heibel, Prof. Dietmar Harhoff Ph.D.

By Martin Heibel, Prof. Dietmar Harhoff Ph.D.

Fast enterprise progress fueled through enterprise capital investments triggers super dynamics within the improvement of younger corporations. even if, entrepreneurship study often ascribes a slightly static function to the entrepreneur in his start-up corporation. The phenomenon of founder turnover-a state of affairs within which marketers choose to go away their preliminary task position-has as a rule been overlooked. furthermore, little is understood concerning the frequency, motives, and the effect of founder turnover. Martin Heibel analyzes founder turnover in German enterprise capital subsidized start-up businesses. He develops designated information units particularly assembled via as scan and a web survey.

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He finds that ventures started by former employees of incumbent firms perform better than other new entrants, which suggests that entrepreneurs’ industry experience has a positive influence on start-up performance. Klepper and 30 2 Prior Research and Theoretical Background Sleeper (2005) study spin-offs in the laser technology industry and ask how they inherit knowledge from their parent companies. The authors find empirical evidence that spin-offs exploit knowledge their founders acquire from their former employers.

Others do not have the ability or the intention to do so and leave their position. The assumption that entrepreneurs in many cases will be unable to make it to effective managers is so prevalent that it has its own name: the founder’s disease (Willard et al. 1992; Utset 2002). Parsons (1972) finds that employees’ propensity to leave their positions decreases over time. The author argues that workers, as they accumulate human capital specific to the firm improve their job match and hence reduce the probability of finding better matches in other positions.

Therefore, in most cases they do not have any reason to quit their position as long as the company has a realistic chance to become successful. Third, even if the company performs badly and eventually tends to go into insolvency, founders in their positions as directors are legally obliged to orderly close down the business. Thus, even if the venture turns out to be a failure, the founders will typically be among the last to abandon the “sinking ship”. 7 8 Schrader and Lüthje (1995) identify negatively motivated voluntary turnover in as little as 10% of all cases they study.

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