Professionalizing entrepreneurial firms: Managing the challenges and outcomes of founder‐CEO succession. (6th August 2019)

• Record Type: Journal Article
• Authors: Kaehr Serra, Caroline; Thiel, Jana
• Other Names: Burton M. Diane guestEditor.; Colombo Massimo G. guestEditor.; Rossi‐Lamastra Cristina guestEditor.; Wasserman Noam guestEditor.
• Is Part Of: Strategic entrepreneurship journal. Volume 13:Number 3(2019)
• Page Start: 379
• Page End: 409
• Publication Date: 2019-08-06
• Subjects: founder‐CEO succession -- organizational blueprints -- organizational change -- professionalization -- threshold firms; Entrepreneurship -- Periodicals; New business enterprises -- Planning -- Periodicals; 338.04
• DOI: 10.1002/sej.1329
• Languages: English
• ISSNs: 1932-4391

Abstract

Abstract: Research summary : The transition from a founder‐led start‐up to a professionally managed firm entails significant change in the firm's organizational design. This transition can constitute a critical juncture for the entrepreneurial firm, and there is a risk of losing key talent. We posit that limiting the disruptive effect of changing organizational structures requires organizational members to not only adopt new roles but also embrace new behavioral norms regarding how the firm operates. We use an inductive multicase study paired with exogenous data on company morale to explore outcome variation in such transitional processes and elicit managerial strategies that can guide successful founder‐CEO succession and the accompanying organizational change of the entrepreneurial firm. Managerial summary : Adapting the organizational structures of an entrepreneurial firm to match the needs of its expanding operations represents a critical moment in a firm's life. During this phase, the founder‐CEO is often replaced by a professional CEO. This event coupled with reorganization can be highly unsettling for the venture's workforce and can lead to turnover with negative performance implications. To minimize disruption, we studied change strategies employed by incoming professional CEOs. We find that most effective CEOs jointly use three change levers—change readiness activation, shared pathway creation, and founder legacy fairness—to help team members adapt to the new situation and align their behaviors with how mature firms operate.