Crossing the threshold from founder management to professional management in Russian firms: An institutional perspective

The purpose of this paper is to bring together a strategic choice perspective and an institutional perspective in order to address the key research questions: how do Russian founder-CEOs perceive the institutional environment when succession issues are taken into consideration?; how do the perceived characteristics of different formal and informal institutions affect the founder-CEO’s decision to delegate authority to a professional CEO?; and what are the main barriers to founder-CEO succession in threshold firms in emerging markets such as Russia?

Using a data set of 500 entrepreneurial companies from fast growing industries in Russia, the paper defines and studies threshold firms and analyses how various perceived characteristics of the institutional environment in emerging markets influence the likelihood of transition from founder management to professional management.

Institutional factors such as poor security of property rights and dependence of the business on relationships with government officials have a negative impact on the likelihood of founder-CEO succession in threshold firms in emerging markets. At the same time, the perception of contract law as insecure increases the likelihood of transition from founder management to professional management.

Most research on initial succession deals with internal organisational factors and does not consider external environments and their influence on founder-CEO departure and willingness to exit from company management. This study is unique in its focus on the external environment and institutional factors and their impact on management transitions in threshold firms in emerging economies.