Do Founders Need a Second-in-Command?

Abstract

To compensate for their professional limitations, founders that hold the CEO position in large firms are often encouraged to hire a “second-in-command” (i.e., a COO or President). Surprisingly, however, little is known about the prevalence of a second-in-command in founder-led firms, or its influence on firm performance (if any). Using novel methods and a sample of over 2,000 IPO firms, we address these gaps. We find that founder-led firms are more likely to have a second-in-command relative to firms without founder CEOs. In contrast to firms without founder CEOs, whose performance is adversely affected by the presence of a second-in-command, we find that founder-led firms perform better when a second-in-command is present. Collectively, our findings add fresh contributions to the entrepreneurship and upper echelons literatures.