The Founder-Firm Disparity: Using the Theory of Effectuation to Explain why Founders Leave their Firms

Abstract: Both Effectuation and Entrepreneurial Exit theories are in nascent states. This means there are many gaps that need filling, ideas to be expanded upon and theories to be tested. This thesis fills a gap in these theories by taking Effectuation theory and making a first attempt at explaining Founder Exit, a part of Entrepreneurial Exit, with it. Two case companies working in the Swedish online retail industry were chosen for this study due to their similar beginnings, similar-looking growth curves and yet their dissimilar endings, with one firm's founders selling their shares and leaving and the others staying to continue the adventure. Effectuation theory predicted that founders were likely to leave because their growing firms would build big company structures, creating a culture clash between founder and firm. This clash was seen to be very present and has been coined the "Founder-Firm Disparity". Effectuation is therefore shown to be a good theory for explaining Founder Exit from successful firms.