The Role of National Context in the Relationship Between Founder CEO and IPO Performance

Although founders are often replaced with external CEOs prior to firms making IPOs, firms that do retain founder CEOs generally perform better at IPO. However, this relationship may be contingent upon context. This study investigates how national context influences the relationship between a founder CEO and IPO long-run performance. We hypothesize that founder-CEOs will perform better in IPO firms in countries where managerial discretion, future orientation, and level of conformity to professionalize management are high, and uncertainty avoidance is low. Using insights from the upper echelon and the institutional theory and utilizing hierarchical linear modeling to analyze over 1,000 firms, we find that founder CEOs perform best in IPO firms in a national context where managerial discretion is low, uncertainty avoidance is high, and level of conformity is high. Implications for theory and practice are discussed