We construct a simple model of founder turnover in which there may be mismatches between the quality of a startup and the ability of the founder. When high-ability founders establish poor-quality businesses, they either choose to close the business or hire a less able CEO. In contrast, low-ability founders with highquality businesses hire a more able CEO. We derive implications of the model for the relationship between firm performance and founder turnover. These predictions are tested using a large sample of Danish startups.
Entrepreneurship; Business creation; Founder turnover; CEO turnover
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The 12th Annual Roundtable for Engineering Entrepreneurship Research, 2012