Does a powerful CEO affect firm survival after an initial public offering (IPO) in a high technology industry? Survival after an IPO is a critical business issue; executive power is a dimension missing from much of the research on managerial factors that affect post-IPO survival. We evaluate our research question by formulating hypotheses that link four aspects of CEO power (prestige, expert, structural, ownership) to five-year post-IPO survival in computer-related industries. Using logistic regression, we find that CEO prestige education, industry tenure, and equity ownership are positively related to post-IPO survival, whereas structural power (specifically dual CEO/Chair title) reduces five-year, post-IPO survival.
The study of managerial power is an area of increasing research interest. Empirical studies of top manager power have been linked to outcomes such as board of director composition (Westphal & Zajac, 1995), executive pay (Barkema and Pennings, 1998 and Finkelstein and Hambrick, 1989), CEO succession (Alexander et al., 1993 and Shen and Cannella, 2002), and firm survival and performance (Daily and Johnson, 1997, Finkelstein, 1992, Haleblian and Finkelstein, 1993 and Pitcher and Smith, 2001). Given the preeminent CEO role in new firm survival (Andrews and Welbourne, 2000 and Bruton et al., 2000), entrepreneurship studies have identified top manager characteristics associated with new venture survival (Andrews and Welbourne, 2000, Sandberg and Hofer, 1987 and Stuart and Abetti, 1990). With a few exceptions (Fischer and Pollock, 2004 and Jackson and Hambrick, 2003), the characteristic of executive power has not been fully incorporated into research on entrepreneurial firm success or failure; however, assessing executive power at the time of initial public offering (IPO) and the IPO valuation has been a growing concern of entrepreneurial research (Lester et al., 2006 and Reber et al., 2005). There is evidence that CEO power has differential effects on outcomes in different contexts (Eisenhardt and Bourgeois, 1988 and Haleblian and Finkelstein, 1993). Given that executives in high technology firms play a critical role in their survival (Siegel & Hambrick, 2005), the need to understand executive power on firm survival in a high technology context is an important though understudied area of research. We empirically explored the relationships between CEO power and post-IPO survival of relatively young firms in technologically complex industries.
In this study, we define power similar to other researchers — as the capacity of an individual, in our case the CEO, to exert influence to change the behavior of a person or group in some intended way. As such, we do not explore the use of power (i.e., political processes) or dynamics of power from relative power differentials within a top management team (i.e., concentration or dispersion of power in upper echelon). We are interested in the relationship between dimensions of top executive power and performance in a strategically critical transition phase in the context of high technology areas: a firm's transition from private to public ownership.
An IPO is a strategic event for a venture with primary responsibility for success attributed to its CEO (Andrews and Welbourne, 2000, Bruton et al., 2000 and Calori et al., 1994). The initial public offering (IPO) and post-IPO period is a time of high uncertainty for organizations and research on this entrepreneurial context has been active (Certo et al., 2001, Fischer and Pollock, 2004, Gulati and Higgins, 2003, Higgins and Gulati, 2006, Jain and Kini, 1999 and Lester et al., 2006). Despite substantial research on this strategic transition of new ventures (Cohen and Dean, 2005, Wilbon, 2002, Stuart et al., 1999 and Welbourne and Andrews, 1996), the lens of executive power has rarely been used to assess post-IPO survival. Although some elements of executive power, such as compensation (Siegel & Hambrick, 2005) and industry experience (Wilbon, 2002) have been studied in a high technology context, executive power and their strategic implications for survival have not been fully explored. For this reason, in this study, we address the following research question: Are powerful CEOs beneficial to post-IPO survival in high technology industries?
