Does Entrepreneurial Orientation Help or Hurt Lone-Founder Firms in Times of Crisis?

Abstract

We investigate whether lone-founder firms respond differently to systemic economic crises than family-controlled firms and non-family firms. We theorize that lone founders self-identify as entrepreneurs and are prone to pursuing an entrepreneurial orientation more than the leaders of other types of firms during times of crisis. Using a global dataset of publicly listed firms, we find that lone-founder firms set themselves apart by reducing their R&D intensity less than the other firm types during systemic crisis years, even though they are impacted as severely by the crisis as the other types of firms. This effect, however, only holds for eponymous lone-founder firms, whose leadership’s entrepreneurial self-identification with the firm is strongest. Stronger board vigilance by independent directors stimulates lone founders to preserve R&D intensity in times of crisis. We also find that lone-founder firms are more resilient after the crisis, but less resilient when these firms are eponymous, suggesting that the appetite for long-term risk-bearing investments of the latter can be excessive. These results demonstrate the conditions under which the entrepreneurial orientation of lone-founder firms helps or hurts in times of crisis.