Abstract

Prior literature tells us VCs are responsible for ousting founders from their leadership positions and replacing them with professional management around IPO time. This argument assumes all founders are equally incapable of running a company beyond the initial startup phase. We question that assumption and propose that the relationship between VC involvement and founder-CEO turnover around IPO time is moderated by other variables such as the pre-IPO performance of the firm, the nature of the involvement of the VCs, and the prior experience of the founder-CEOs. Our hypotheses are tested on 108 founder-CEOs of IPO firms and supported to a large extent. Implications are discussed.

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