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The Age Effect of Entrepreneurship: Founder's Tenure, Firm Performance and the Economic Environment

Author

Listed:
  • Marco Cucculelli

    () (Universit… Politecnica delle Marche, Faculty of Economics "Giorgio Fu…")

  • Giacinto Micucci

    () (Banck of Italy - Ancona)

Abstract

This paper tests the effect of founder's tenure on firm performance by taking into account the impact of the changes occurring in the economic environment. We use a large dataset of founder-run firms that includes, in addition to financial data, company data directly collected through a survey of about 2,000 Italian firms. Unlike the negative relationship reported in most empirical papers, we found an inverted U-shaped relationship between founder-CEO tenure and firm performance. This relationship is strongly influenced by the characteristics of the environment in which the company competes: while experience plays a key role in fostering performance in less innovativeand less competitive sectors, a dynamic environment makes the performance of the firm less responsive to the benefits of founder tenure. From the viewpoint of policy, growing environment dynamism calls for greater efficiency of the market for corporate control, in order to assure a continued match between skills of CEOs and the external environment.

Suggested Citation

  • Marco Cucculelli & Giacinto Micucci, 2009. "The Age Effect of Entrepreneurship: Founder's Tenure, Firm Performance and the Economic Environment," Mo.Fi.R. Working Papers 21, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:21
    as

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    File URL: http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir021.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ageing; changing environment; entrepreneurship; founder-run firms;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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