By: Dali Ma (Drexel University), Dasha Popova (Drexel University), and Thomas J. Fewer (Georgetown University)
Venture founders play a crucial role in corporate history, and higher-status founders often benefit from the ability to quickly and easily tap into financial resources and hire the best and brightest employees. But could there be a downside to having a high-status founder attached to the firm? In a paper under review at a top business management journal, Entrepreneurship Initiative Fellow Thomas Fewer, along with Professor Dali Ma and PhD Candidate Dasha Popova, explore the effects of having a high-status founder when the social hierarchy collapses. They argue and find, in a sample of 4,480 firms in late Imperial Russia (1797-1914), that as social disruption intensifies, so too does backlash against firms with high-status founders. They argue that this “birthmark effect” comes as a result of the public’s dislike of the governing and political classes, and businesses with high-status founders become one way of undermining the elite. The findings of this study suggest that managers and executives should pay close attention to how social status of firm founders shapes firm outcomes during turbulent social and economic periods.