Founder versus agent CEOs: Effects of founder status and power on firm innovation and cost of capital

How does CEO founding status combined with CEO power jointly influence organizational outcomes? While several studies have separately explored the role of founding status on firm performance, as well as the role of CEO power on organizational outcomes, few have addressed how founding status combined with CEO power might jointly influence both positive and negative organizational outcomes. Based on a sample of 3055 firm-year observations from 501 publicly traded high-tech managed by 777 CEOs over the sample period of 15 years (1996 to 2010), we find that powerful founder CEOs enhance an organization's innovation performance. However, having a powerful founder CEO is also likely to raise the firm's cost of capital, resulting in lower investment returns and detrimental consequences for firm performance. Our findings have several theoretical and practical implications for understanding the impact of CEO status and power on a firm's innovation and stock performance.