Crisis Reveals Character: Founder and Founding Family Involvement During Firm Crises

Abstract

We differentiate between “founder involvement,” “founding family involvement,” and the absence of such involvement in a firm. We maintain that family owners and chief executive officers (CEOs) assume a “familial” identity given family relations within the firm, whereas mere founders, influenced by arms-length relations to commercial stakeholders, embrace the opportunity-seeking “entrepreneurial” identity of an independent maker. We theorize and show how founder and founding family involvement shape the turnaround strategy and performance of firms divergently—from each other and from cases without such involvement—and explicate how the respective effects are moderated by crisis severity and firm age.