Impact of Venture Capitalists on Founder Turnover: Implications for Firm Governance

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Prior literature tells us venture capitalists(VCs) are responsible for ousting founders from their leadership positions and replacing them with professional management around initial public offering (IPO) time. This argument assumes all founders are equally incapable of running a company beyond the initial startup phase. We question that assumption and propose that the relationship between VC involvement and founder-CEO turnover around IPO time is moderated by other variables such as the pre-IPO performance of the firm, the nature of the involvement of the VCs, and the prior experience of the founder-CEOs. Our hypotheses are tested on 108 founderCEOs of IPO firms and supported to a large extent. Contrary to the conventional view that VCs are primarily perceived as driving forces behind replacement of founder-CEOs with professional managers, this study demonstrates that there is, in fact, a much more complicated and dynamic relationship between VCs and founders of IPO firms. We provide evidence that there are certain factors that induce VCs to replace founder-CEOs and other factors that constrain or facilitate their ability to do so.

Original languageAmerican English
JournalStrategic Management Quarterly
StatePublished - Jan 1 2016


  • corporate governance
  • venture capitalists
  • founder turnover
  • professional management
  • founder-CEO succession
  • young ventures


  • Business
  • Business Administration, Management, and Operations
  • Economics
  • Entrepreneurial and Small Business Operations

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