A study of biotechnology start-ups undergoing leadership change: Antecedents of change and endogenous performance consequences |
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| Authors: | Preeta M Banerjee Benjamin M Cole |
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| Institution: | 1. International Business School, Brandeis University, 415 South St., Waltham, MA 02454, USA;2. Management Systems Department, Schools of Business Administration, Fordham University, 1790 Broadway, Suite 1127, New York, NY 10019, USA;1. Faculdade de Tecnologia de Sorocaba, Centro Estadual de Educação Tecnológica Paula Souza (CEETPS), Av. Eng. Carlos Reinaldo Mendes, 2015, Alto da Boa Vista., 18013-280, Sorocaba, São Paulo, Brazil;2. Escola Politécnica da Universidade de São Paulo (EPUSP), Av. Prof. Mello Moraes, 2231, 05508-030 São Paulo, São Paulo, Brazil;1. Department of Communications and Networking, Aalto University School of Electrical Engineering, P.O. Box 13000, FI-00076 AALTO, Finland;2. Department of Marketing and International Business, Turku School of Economics, FI-20014 University of Turku, Finland;1. University of Antwerp, Prinsstraat 13, Z-403,, 2000 Antwerp, Belgium;2. Antwerp Management School, Antwerp, Belgium |
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| Abstract: | One of the most important decisions that a new biotechnology firm faces is whether to replace its founding CEO, who often has been involved with the invention of the firm's core technology, with a more professional manager, who has broader commercialization skills to help the firm to grow into a viable business. In this paper, we argue that leadership change away from the founding CEO is influenced strongly by the interests of key stakeholders and that the endogeneity inherent in the change (or non-change) influences firm performance. As the context surrounding decision-making changes from pre-patent to post-IPO, key stakeholders often may not view what is best for the firm and best for self-interest in the same way. Using data on change in leadership at 135 U.S. biotechnology equipment firms, we find evidence that the context in which decisions are being made influences which of the various competing interests will take precedence. The results further confirm the importance of controlling for endogeneity in decision-making when examining firm performance. |
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