Dead Founders

24 October 2008 at 3:35 am Lasse 2 comments

| Lasse Lien |

Here is a link to a very nice paper in the somewhat morbid empirical tradition of using death as a natural experiment. Hans K. Hvide looks at the value of the founder to a newly established firm by examining the performance effects of founder death (or the death of a member of the founding team). Using several empirical tests and an impressive battery of robustness checks, he concludes that the negative impact of founder death is almost unnoticeable on all the classic performance variables. Apparently the importance of the founder is as a discoverer of opportunities and an initiator. As a manger the founder appears to be quite substitutable (on average).

Entry filed under: - Lien -, Entrepreneurship, Management Theory.

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2 Comments Add your own

1. Peter Klein | 24 October 2008 at 8:49 am

That’s a very interesting application and a good addition to the “death of key player as natural experiment” literature. If I were the relative of the dead founder, however, I might worry about endogeneity. :-)
2. Lasse | 24 October 2008 at 9:03 am

Actually, the paper takes endogeneity issues very seriously. It even has a discussion about whether the results could be influenced by very sick founders establishing firms with properties that are systematically different from other start ups. I mean, would you start a business if you knew you had a year or two to live?