Founder–inventors and their investors: Spurring firm survival and growth

Abstract

Research Summary Drawing on insights from resource orchestration literature and the competence‐based perspective, we argue that founders involved in inventive activities display firm‐idiosyncratic founder–inventor competences critical to the firm's performance. This effect is enhanced by venture capital investors. To test our hypotheses, we use panel data from 1,498 firms. Controlling for founders' technical skills, our results reveal that founder involvement in R&D increases firm survival and growth. Furthermore, venture capitalists leverage founders' engagement in inventive activity to achieve even higher growth. Our findings imply that continuous application of founder–inventor competences serves to catalyze effective resource orchestration and strengthen new venture performance. Managerial Summary The role of founders and founder competences is critical as firms progress along their life cycles, whereby founders face decisions about which tasks deserve their attention and which ones they can delegate to their employees, middle‐management, and/or new hires. One key strategic choice for founders is whether to engage in inventive activities themselves and remain engaged. Based on a large firm dataset, we find that founders' inventive activities spur survival and growth. Furthermore, venture capital investors leverage the effect on growth because they often bring in their own industry expertise, turn attention to the core capabilities, and revitalize the top management team. These investor activities enable founders to focus their attention on areas in which their involvement best supports the firm's performance, namely inventive activities.

The founder chief executive officer: A review of current insights and directions for future research

“…Florin (2005), for instance, found that venture performance is not significantly different with and without VC backing for both periods of pre‐IPO and post‐IPO. A recent study by Haeussler et al (2019) showed a positive effect from VC investment in heightening the impact of the founder's involvement in innovative activities on firm performance. In a joint analysis of firm environment and founder individual characteristics, Hmieleski et al (2015) observed that the founder's entrepreneurial experience is positively related to firm performance in discovery (stable) contexts, whereas educational attainment, strong ties, and psychological capital (an index of optimism, self‐efficacy, resilience and hope) are positively related to firm performance in dynamic contexts.…”

“…Third, broader sample and data collection from diverse countries and cultures will strengthen the external validity of founder‐CEO research. Current studies use data from China (Zheng, 2012), Germany (e.g., Haeussler et al, 2019), Russia (e.g., Bruton & Rubanik, 2002), Sweden (e.g., Balachandran, Wennberg, & Uman, 2019), Netherlands, Belgium (e.g., Buyl, Boone, Hendriks, & Matthyssens, 2011), and other countries. Although beneficial, future research should continue to collect data from different countries—and from multiple countries—to advance comparative research and test theories beyond primarily Western contexts.…”

CAN FOUNDERS’DUAL ROLESFACILITATE INNOVATION? – FROM THE PERSPECTIVE OF FOUNDERS’ R&D NETWORK CHARACTERISTICS

“…Entrepreneurs' characteristics influence the entrepreneurial behavior significantly (Álvarez-Herranz et al, 2011). Some entrepreneurs engage in companies' inventive activities, which enhances firms' absorptive capacity (Mueller et al, 2020) and spurs firms' survival and growth (Haeussler et al, 2019). These entrepreneurs usually own the dual roles of inventors and founders.…”

The role of skill versus luck in new venture survival

“…As such, we made the conscious decision to focus on the antecedents of new ventures’ survival and not on new ventures’ growth or new ventures’ performance in general. Although there are overlaps and interrelations between these concepts (Haeussler et al., 2019; Miller et al., 2013; Pajunen & Järvinen, 2018), we again want to emphasize the importance of distinguishing between them.…”

“…Cardon et al., 2005; Carsrud & Johnson, 1989; Fauchart & Gruber, 2011; Gartner, 1989; Gimeno et al., 1997). We cannot ignore that entrepreneurs play a vital role in the emergence of organizations (Jenks, 1950; Kilby, 1971; Peterson, 1981; Van de Ven, 1980) and in ensuring their viability (Haeussler et al., 2019). Looking at entrepreneurs as gamblers disregards their very real influence and, as Gartner (1989, p. 64) puts it, separating the entrepreneur from the complex and intricate process that venture creation represents is equivalent to trying to tell the dancer from the dance.…”