IN ORDER TO GROW, MUST THE FOUNDER GO - A COMPARISON OF PERFORMANCE BETWEEN FOUNDER AND NON-FOUNDER MANAGED HIGH-GROWTH MANUFACTURING FIRMS

Conventional wisdom and much of the entrepreneurship/small business literature hold that rapidly growing new firms quickly outgrow the founder's managerial capacity. Unless the founder is replaced or supplemented by "professional" management, performance is predicted to stagnate or decline rapidly. To empirically test this conventional wisdom, a group of founder-managed high-growth firms was compared with a group of similar but "professionally" managed firms. Our sample of 155 mostly high-tech manufacturing firms was taken from Inc.'s 1985, 1986, 1989, and 1990 lists of the 100 fastest-growing publicly held firms in the United States. Mean values for 11 performance measures were calculated for the full sample and for both subsamples. Differences in mean values were tested for statistical significance. Overall, no significant differences in performance were found between founder-managed and professionally managed firms in this study. On average, founder-managed films were somewhat (but not significantly) smaller and were growing at a slightly (but not significantly) lower rate. Founder-managed firms also showed higher (but not significantly so) rates of profitability. Employee productivity was virtually identical for both groups of firms. Share price performance of professionally managed firms exceeded that of founder-managed firms by more than was expected, but the difference was not significantly different from zero. The data do not support the predictions of conventional wisdom. In our sample, founder-managers appear to have been able to adapt to the increasing complexity of rapid growth without sacrificing performance or losing control. Our measures captured no evidence of management crisis or founders' disease afflicting these high-growth founder-managed manufacturing firms.