Standard microeconomics ignores personalities, but business studies stress the importance of entrepreneurs. This column presents evidence that shows that personalities are important. Looking into the death of a firm’s founder during the first ten years of a company’s existence, the data suggest that entrepreneurs matter – they are the ‘glue’ that holds a business together.VOX
Do entrepreneurs matter?
Sascha O Becker, Deputy Director, Centre for Competitive Advantage in the Global Economy (CAGE) and Professor, University of Warwick and Hans K. Hvide, SIRE Professor of Economics and Finance at the University of Aberdeen, Business School, and CEPR Research Affiliate
All our results are consistent with a simple mechanism: entrepreneurs personally embed a major part of the value of the firm, and the entrepreneur vanishing has a large negative impact. The death of the founder appears to shift the firm outcome distribution to the left. For firms in the lower part of the outcome distribution, the consequence is a higher probability of closing down, while for firms higher up in the quality distribution, the effect will be a significant reduction in firm growth.