Abstract
In this study, we explore how founder-CEOs’ might influence the pursuit of portfolio (divestiture) and organizational (downsizing) restructuring strategies. We reason that by virtue of their founder status, founder-CEOs identify more strongly with their firms which resonates in their decision-making. We argue that founder-CEOs, given their attachment to the firm, are less likely to steer their firms toward aggressive restructuring strategies because doing so could significantly alter the “original” identity of the organization. We also propose that poor past performance serves as a boundary condition in this relationship. We tested our predictions using a panel data of 235 large, publicly-traded U.S. firms. The findings support our argument that founder-CEO led firms were less likely to pursue portfolio restructuring but not organizational restructuring strategies. Contrary to our predictions, past firm performance seems to actually strengthen the negative effect of founder-CEO leadership on portfolio restructuring. Implications for research and practice are discussed.
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