CRIEFF Discussion Paper Number 0903
The Age Effect in Entrepreneurship:
Founder’s Tenure, Firm Performance, and the Economic Environment
Marco
Cucculelli and Giacinto Micucci
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 innovative- and 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.
JEL Classifications: L25, J24, G34.
Keywords:
ageing, entrepreneurship, founder-run firms, changing environment.
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