Working Paper | HBS Working Paper Series | 2014

The Founder's Resource‐Dependence Challenge

by Noam Wasserman


Does the degree to which founders keep control of their startups affect company value? I argue that founders face a "control dilemma" in which a startup's resource dependence drives a wedge between the startup's value and the founder's ability to retain control of decision making. I develop hypotheses about this tradeoff and test the hypotheses on a unique dataset of 6,130 American startups. I find that startups in which the founder is still in control of the board of directors and/or the CEO position are significantly less valuable than those in which the founder has given up a degree of control. On average, each additional degree of founder control (i.e., controlling the board and/or the CEO position) reduces the value of the startup by 23.0%‐58.1%.

Keywords: Leadership; Value; Business Startups;


Wasserman, Noam. "The Founder's Resource‐Dependence Challenge." Harvard Business School Working Paper, No. 14-090, March 2014.