Improvement or Peril: The Paradox of Professionalizing Innovation-Driven Portfolio Firms

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Medaugh, M. (2022). Improvement or Peril: The Paradox of Professionalizing Innovation-Driven Portfolio Firms. Unc Charlotte Electronic Theses And Dissertations.
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Abstract

To understand why some innovation-driven portfolio firms benefit more from venture capital (VC) funding than others, I explore the salient phenomenon of founder CEO exit. Integrating institutional logics and psychological contracts theories, I propose a meso-level theoretical framework that identifies and explains how an institutional logic of new venture professionalization shapes suboptimal founder CEO exit strategy in portfolio firms. Founder CEO exits may enhance institutional legitimacy, while also fostering contentious relational dynamics that undermine trust and cooperation between founders and venture capitalists; spill over to affect observers; and contribute to a negative sociopolitical climate within portfolio firms. I derive and test hypotheses about the paradoxical effects of founder CEO exit on portfolio firm performance over time and likelihood of failure, including how the conditions of exit – namely, the timing and nature of the exit event – influence those outcomes. I use growth modeling and logistic regression to analyze a unique panel data set of 182 high-technology portfolio firms, founded 1990-2010. Despite mixed empirical results, I found overall support for my proposition: Rigid implementation of founder CEO exit strategy in portfolio firms may improve some short-term metrics of performance (i.e., valuation), while imperiling other longer-term outcomes (i.e., profitability and odds of survival).

Details
Author

Medaugh, Melissa

Title

Improvement or Peril: The Paradox of Professionalizing Innovation-Driven Portfolio Firms

Physical Description

1 online resource (146 pages) : PDF

Date

2022

Degree Granting Institution

University of North Carolina at Charlotte

Abstract

To understand why some innovation-driven portfolio firms benefit more from venture capital (VC) funding than others, I explore the salient phenomenon of founder CEO exit. Integrating institutional logics and psychological contracts theories, I propose a meso-level theoretical framework that identifies and explains how an institutional logic of new venture professionalization shapes suboptimal founder CEO exit strategy in portfolio firms. Founder CEO exits may enhance institutional legitimacy, while also fostering contentious relational dynamics that undermine trust and cooperation between founders and venture capitalists; spill over to affect observers; and contribute to a negative sociopolitical climate within portfolio firms. I derive and test hypotheses about the paradoxical effects of founder CEO exit on portfolio firm performance over time and likelihood of failure, including how the conditions of exit – namely, the timing and nature of the exit event – influence those outcomes. I use growth modeling and logistic regression to analyze a unique panel data set of 182 high-technology portfolio firms, founded 1990-2010. Despite mixed empirical results, I found overall support for my proposition: Rigid implementation of founder CEO exit strategy in portfolio firms may improve some short-term metrics of performance (i.e., valuation), while imperiling other longer-term outcomes (i.e., profitability and odds of survival).

Genre

doctoral dissertations

Subjects--Topics

Entrepreneurship
Management
Psychology

Degree

Ph.D.

Keywords

Entrepreneurship
Founder Exit
High-Technology Firms
Institutional Logics
Psychological Contracts
Venture Capital

Subject Area

Organizational Science

Advisor(s)

Kellermanns, Franz

Committee Members

Woehr, David
Stanley, Laura
Zhao, Wei

Degree Note

Thesis (Ph.D.)--University of North Carolina at Charlotte, 2022.

Rights Statement

This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s). For additional information, see http://rightsstatements.org/page/InC/1.0/.

Rights Holder Information

Copyright is held by the author unless otherwise indicated.

Identifier

Medaugh_uncc_0694D_13036

Permalink

http://hdl.handle.net/20.500.13093/etd:2891