Influence of Entrepreneurial Behavior on the Risk and Performance of igh-Technology Firms in the United States of America

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NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

DEPARTENT OF ECONOMICS

BACHELOR'S THESIS

Influence of Entrepreneurial Behavior on the Risk and Performance of igh-Technology Firms in the USA

Alexandra Blagorazumova, BEC-132

Supervisor:

Anastasia Stepanova, PhD

Moscow

2017



Content

Abstract

Introduction

1. Literature review and hypothesis development

1.1 Entrepreneur

1.2 The entrepreneur's influence

2. Entrepreneurial behavior: family firm creation and exit strategy

2.1 Family business

2.2 Exit strategy

3. Data and summary statistics

3.1 Sample

3.2 Dependent variables

3.3 Independent variables

3.4 Methods

4. Results

5. Discussions of results

Conclusion

References

Appendix



Abstract

This study explores the question of entrepreneur's behavior (its influence on the company's risks and performance) and also researches the problem of the entrepreneurial long-term strategy. The problem of the entrepreneur's impact on the company's performance has attracted a lot of attention among scientific society during recent years, when the entrepreneurial firms became to occupy leading positions in the American market. The focus of our paper is on the suggestion that entrepreneur's involvement in the management differently influences company's activity. Moreover, we investigate entrepreneur's initial motives towards his business in the long-term. Using the large sample of US high-technology firms we determine that depending on the position in the company (CEO, Director, major shareholder) entrepreneur differently influences the company's performance, risks and R&D expense. Our findings of entrepreneur behavior, based on logit-regression analyses, determine that low risks induce entrepreneur to follow "exit strategy" whereas strong performance is the main reasons to the family business strategy. We suggest several new research opportunities for further investigation of entrepreneur's activities in the company's life cycle.



Introduction

Entrepreneurship has been investigated as an important socio-economic phenomenon during several decades and it is still pressing topic for discussions and analyses among contemporary scientists. The evolution of concept "entrepreneur" is associated with many famous economists such as Adam Smith (1776), John Maynard Keynes (1936) and Joseph Alois Schumpeter (1926). The first attempts to determine the key characteristics of "entrepreneur" describe the person, who is in contrast to the capitalist not only seeking profit but also has innovative ideas and contributes a lot to his business. (Schumpeter, A.S. 1926). In the term "entrepreneur" there were distinguished such personal qualities as initiative, authority, foresight, risk appetite. That is why the entrepreneurs were considered as a special class of society, which has a different model of motives and follows irrational strategy (or is based on another rationality) to measure the success and achievement in his business in comparison with a usual capitalist, whose initial motive is profit.

According to the Audretsch, D.B. (2003), American economy has changed significantly during last decades: from the dominated large business models in the early 1980^th to one, which demonstrates the high growth numbers of new firms creation. A proof of this trend can be found in the research, which was conducted by the Kauffman Foundation, and demonstrates positive dynamics in the entrepreneurial activities in the USA: "The rate of new entrepreneurs" has risen by 0.02% and has reached 0.33%, which means that on average 330 out of every 100 000 adults created new business each month in 2015 (compared to 0.31% in 2014), moreover, the increase in the "Growth entrepreneurship index" by 0.71 basis points reveals that the financial and operating performance of newly created companies has improved dramatically during the last year.

This rapidly growing tendency of the emergence of the new entrepreneurs and their impressive success in the company's management attract a lot of attention and become the most pressing issue among academic society these days. Indisputable proofs of their prosperous company's performance are the top places in the rating lists, which belong to entrepreneurial firms, such as Alphabet Inc., Microsoft Corporation, Facebook Inc. etc.

There are a lot of articles in journals and magazines, radio and television programs on subjects related to the personal success each of them and the stories of their companies. However, we still have no common understanding of the overall picture of the modern entrepreneur: his unique personal characteristics and his business model that stand out him and his firm from the other companies. Moreover, since this tendency is relatively new, the lack of attention was devoted to the initial motives and objectives that are pursued by the entrepreneurs in their businesses.

What motives does entrepreneur have when he decides to create his own business and what goals does he follow managing his business?

While previous studies focus on the definition of such persons and their characteristics (Schweikart L., Doti L.P., 2009), identification of several types of the entrepreneurship (Ucbasaran D. et al, 2008; Plehn-Dujowich, J., 2009), the important question of the initial reason of the emergence of the entrepreneurship and their goals is still need to be studied in more details. The knowledge of the origin entrepreneur's goals allows to explain the current fast-growing trend of the increasing number of entrepreneurs.

The few researches deal with this topic (Ucbasaran et al., 2008 and Parker, 2014) Both articles identify several reasons why entrepreneur decides to run his own business rather than being an employee. For example, the Parker (2014) considers several modes of entry, such as running new venture or taking over an existing firm, and determines the various factors, which influence the decision to become an entrepreneur, such as borrowing constrains, human capital, geographical location or ethnicity.

However, these type of papers focus on the origin motives and do not expose the entrepreneurial aims towards his business on the long-term horizon. Our research aims to fill this gap, identify the possible ways of entrepreneurial behavior after business creation in the long-term and determine the motives towards to his business.

Our second set of analyses is related to the entrepreneurial influence on the company's activities. Specifically, we have tested the factors, which can affect the company's performance, risks and research and development expenses (R&D expenses).

Several studies were made to identify the entrepreneurial impact on company on the example of the private firms or small businesses (Eggers F., Kraus S., Hughes M., 2013) or the influence of this entrepreneurial phenomena on the economy overall (Bosma, N.S., Levie, J., 2010; Urbano D., Aparicio S., 2016). However, in our study we document the factors, which determine the entrepreneurial influence on the modern US high-technology market, where, according to the Kauffman research, the greatest amount of new firms' creation is observed.

Therefore, the purpose of this research is to explain the growth performance of entrepreneurial firms and determine the factors that drive these results. Moreover, it is necessary to understand what motives lead the entrepreneur to participate in the company's activity and what factors influence the entrepreneurial decisions in the long-term.

In carrying out this research, two important contributions were made to the literature. First, the study contains the review of the literature focused on the term "entrepreneurs", "entrepreneurial family firms" and "entrepreneurial intentions to exit". Secondly, the study investigates and determines the influence of entrepreneurial participation in the company's activities and his personal characteristics on the firm's performance, risks and R&D expenses. Finally, the research paper explains the origin motives that are considered by the entrepreneur when he takes the decision to create a family firm or to exit his company.

Section I contains theoretical development and the literature review of an entrepreneurial impact on the company's activities and also research of the entrepreneurial family firms creation and exit strategy. Section II describes the sample and methods used in the data analyses. Section III depicts the obtained results and Section IV presents discussion of the findings and suggestions for future analyses. Finally, section V summarizes our base conclusions.



1. Literature review and hypothesis development

1.1 Entrepreneur

Nowadays, a widespread definition of the term "entrepreneur" as "a person who creates, operates his own business and, assuming the risks and initiative, attempts to make profit" can be found in every professional dictionary.

However, a vast majority of researches have tried to build more narrow definition of the entrepreneur's concept and identify the entrepreneurial essence in modern business environment. There are several types of research articles, where authors distinguished personal features of the entrepreneurs: risk-taking persons (Knight F.H., 1921; Drucker P. 1970; Schweikart L., Doti L.P., 2009), innovative persons (Hisrich, R.D., 1990; Bolton W.K., Thompson J.L., 2000).

Thus, the above mentioned literature investigates the different variations of the term "entrepreneur", however, there is still an uncertainty in the unique definition of an entrepreneur portrait. Therefore, in recent studies, analysts pay a lot of attention to the strategy followed by an entrepreneurial. The strategy concept was created by the Danny Miller in 1983 and describes the entrepreneurial orientation (EO) behavior towards risk taking, innovation, and proactiveness strategy-making process. Further, this definition was supplemented by many researches that contribute a lot to the development of EO concept. For example, Jeffrey G. Covin and Dennis P. Slevin (1998) clarify the term of EO strategy suggested by Danny Miller.

The authors argued that the company sticks to the EO strategy if 1) its top-management is prone to the acceptance of risky projects; 2) the firms are not afraid to the conceptual changes and implementation of innovations in order to gain the competitive benefits and 3) employ the aggressive strategy to compete successfully with other firms. It is worth noting that the authors of next works were divided by two groups: the first one accepted the definition that was introduced by Jeffrey G. Covin and Dennis P. Slevin, using three dimensions to determine the EO strategy and focused on the research of the entrepreneurial influence on the firm's performance (Dickson P.H., 2004; Kellermanns F.W., Eddleston K.A., 2006; Tang J. et al., 2008; Casillas J.C. et al., 2010; Frank H. et al., 2010; Cruz C., Nordqvist M., 2012). The second group highlighted the importance of the development and systematization of the unique definition of the entrepreneurial phenomenon (Lumpkin G.T., Dess G.G., 1996; Lee S.M., Peterson S.J., 2001; Casillas J.C., Moreno A.M., Barbero J.L., 2011; Weismeier-Sammer D., 2011).

Other urgent question that attracts a lot of attention among scientific community is whether the founder should be interpreted as the entrepreneur. It is widely accepted fact that the founder plays an essential role in the company's structure and strategy. Thus, the companies, where the founder holds the leading position, differ from the agent-led companies in terms of performance, risks, corporate structure and decision-making strategy (Hughes M., Morgan R.E., 2007; Tang J., 2008; Moreno A.M., Casillas J.C., 2008; Casillas J.C. et al, 2010; Deb P., Wiklund J., 2017) . Particularly, this phenomenon is inherent in the high-technology industry in the USA, which nowadays belongs to the most fast-growing sectors. (McQuaid J., Smith-Doerr L., Monti D. J., 2010; Hart D. M., 2011; Giannantonio C.M., Hurley-Hanson A. E., 2016). For instance, Greenstein, S (2011) identified that the key role of the "Apple Inc" success was attributed to his entrepreneur and founder Steve Jobs.

His individuality is the illustrative example, why the founder of the high-technology company satisfies the three criteria of EO strategy and can be identified as an entrepreneur. He decided to follow the challenging strategy and implemented his innovative idea, which was risky step in the highly competitive environment, where the firm "Microsoft" was a leading player. According to these facts, the main characteristics of the entrepreneur, such as risk-taking, innovative and proactive, can be illustrated by this case and provide an evidence of the EO strategy of the founder.

At the other hand, entrepreneurial literature also devotes a considerable attention to the consequences of the entrepreneur's presence in the firm. Taking into consideration the three main characteristics that are commonly accepted by the majority of scientists, entrepreneurial influence can be divided into three groups: performance, risks and Research and Development costs (R&D costs).

1.2 The entrepreneur's influence

The entrepreneurial orientation (EO) strategy suggests that the firm widely accepts risky projects in order to improve the performance and compete with the other firms. Thus, the entrepreneur, which follows EO strategy, influences the risks of the whole company and, that is why this type of companies is imposed to higher risks than the companies without entrepreneur. (Rauch et al, 2009; Li et al., 2009; Alegre & Chiva, 2013; Chen, Hsu, 2013). However, the degree of involvement in the company's governance and structure can influence differently the possibility to make decisions and manage the company. (Randoy T Oystein R Mer; Deb P Wiklund J, 2017). Managing company as a CEO or as a member of Board of Directors, the entrepreneur has greater access to the decision-acceptance and, for example, can implement the project in the situation of uncertainty, taking the responsibility of the potential risks. (Hussain J Ismail K Shoaib Akhtar C, 2015). Besides, the involvement of an entrepreneur as a shareholder can also influence the company's risks (Mafrolla E. et al, 2016; Kun Su et al; 2017). For instance, disposing significant stake in the company, entrepreneur can influence the company's management and the overall company's strategy.

The proactive and risk-taking strategy mostly leads to the higher performance. This topic attracts a lot of attention and discussions among scientists, who try to determine the factors that influenced the performance of the entrepreneurial characteristics. (Rauch A., Wiklund J., Lumpkin G., Frese M., 2004). Moreover, these results are consistent with the hypothesis related to the risks, because higher risks yield higher performance.

The last characteristic of the EO strategy, innovativeness, leads entrepreneurial firms make higher investments in order to create new products and compete with other firms. That is why, consistent with logics of risk hypothesis, the higher access to the decision-acceptance, the higher R&D expenses entrepreneur prefers to implement.

Based on these suggestions, the work puts the following hypotheses, which test the influence of entrepreneurial degree of involvement on the company's risks, performance and R&D expenses.

H1.a: The companies, where the entrepreneur is appointed to the CEO position, have a relatively higher business risks, performance and R&D expenses than other companies do.

H1.b: The companies, where the entrepreneur serves as director, have a relatively higher business risks, performance and R&D expenses than other companies do.

H1.c: The higher the entrepreneur's stake is, the higher the company's risks, performance and R&D expenses are.

Moreover, the entrepreneurial personal characteristics also play an important role and measure his risk appetite and, consequently, influence the performance and propensity to R&D expenses. Firstly, it is widespread conclusion that in general women are more risk-averse than men are, and according to this fact, the companies, where female makes the decisions, has lower risks (Jennings, McDougall, 2007). Secondly, there are a lot of works that investigate the dependence between the entrepreneurs' age and their risk attitude and find negative relationship between these two factors (Levesque, Minniti, 2006). Moreover, the age also can be a proxy variable for entrepreneurial experience and positively influence the company's perfomance (Davidsson, Honig, 2003). However, the entrepreneurs have not been the object of such studies yet. Finally, number of studies found out that the level of education also influences the personal risk appetite but there still remain fields to the future discussions. (Florin J., 2005).

H1.1d: The companies with male-entrepreneur face higher risk level, performance and R&D expenses relative to the companies with the female- entrepreneur.

H1.1e: The older the entrepreneur is, the lower company's risk, performance and R&D costs would be.

H1.1f: The higher the entrepreneur's education is, the lower the company's risks, performance and R&D costs are.



2. Entrepreneurial behavior: family firm creation and exit strategy

2.1 Family business

The second part of this section is devoted to the entrepreneur's behavior relative to his business. The entrepreneurs can have different goals in respect to their business in the long-term: on the one hand, they can have intention to create family firms and continue to develop the company, and, on the other hand, the entrepreneurs can decide to exit the company and get return of the sale of his stake.

In the recent study Daspit J.J et al. (2016) describes a modern trend of the family firms' creation and past trends that were discussed by a vast majority of researches during several years. According to the PwC research "The 2017 US Family Business Survey" about 64% of US gross domestic product was made by family firms and they have comprised about 35% of the Fortune 500. Moreover, 64% of family companies affirm that their business is more entrepreneurial than other types.

These statistics illustrate the significant role of family firms in the US economy. That is why numerous articles have looked into the different aspects of family companies.

The one stream of the researches have analyzed the difference between family and non-family firms, trying to propose the definition of family firms and specify its peculiar features. For example, family members can exploit their privileged positions and gain extra benefits of company ("tunneling") (Bertrand et al, 2008), family companies can hire the non-qualified family members and pay them high salaries and compensations (Bennedsen et al, 2007; Caselli et al, 2013). Moreover, regarding family firms the focus turns to modification of agency problems, such as managerial expropriation (Demsetz and Lehn, 1985).

Given the importance of family firms in the US economy, nowadays several researches still pay a lot of attention and study more carefully this type of companies.

Today the research focus has changed from the companies, where family has the control equity share (Masulis et al, 2011; Hsu et al, 2014) to the firms with the family ties, which is called "nepotism" (Perez-Gonzalez, 2006; Bennedsen et al, 2007 ). In the recent study Leone F., Parise G. and Sommavilla C, 2016 measure the company's nepotism by the numbers of family ties and provide evidence that on average every American firm has minimum one family ties in the company's workforce.

Thus, both types of family participation, family ownership and family ties, were taken into consideration in our research paper. We determine that the founder follows the family creation strategy if 1) the founder involves the family members in ownership 2) the founder hires the family members as executive officers.

A number of empirical studies define the main characteristics of family firms that distinguished them from non-family firms. The commonly accepted feature, that have almost all family firms, is the orientation on the long term existence (Bertrand and Schoar, 2006; Leone et al, 2016). Because of this fact, such types of companies differ in a lot of activities, such as risk-taking (), Merger and Acquisition strategy (M&A) (Defrancqa et al, 2016; Adhikari H. et al, 2016), investment decisions (Asker et al, 2014; Leone et al, 2016), etc. Hence, comparison between family and non-family firms is the urgent question in the family literature and there is still no the common understanding, which of these types of companies influence the activities better.

The first group of researches come to the conclusion that family firms underperform non-family firms: the orientation on the long-term existence lead the company to be more risk-averse, so that is why such companies have higher performance indicators (Giroud, 2013).

The second group of researchers believe that family firms prone to the family entrenchment, which can also affect the company's performance ((Burkart et al, 2003, Caselli et al, 2013).

The findings of these articles illustrate that family firms influence all company's activities and completely change the company's nature and strategy compared to non-family firm. That is why so many scientists look into the intentions to create a family firm. This topic is very important for the understanding not only the family business, but the overall American economy.

2.2 Exit strategy

The different way, which can be followed by entrepreneur, is the exit strategy. The vast majority of such researches investigates the intentions of entrepreneurial exit based on the sample of small business or private firms. Hence, the most common concept of exit is "the process by which the founder of privately held company leave the firm they helped to create" (DeTienne D., 2010). Nowadays, greater emphasis is placed on this topic among entrepreneurial literature, which is addressed to the three main issues: firstly, the problem of the definition of different types of exit (founder's exit from the firm (Bruce and Picard, 2006; Harada, 2007) or the firm's exit from the market). Secondly, a lot of attention is paid to the dependence between business failure and founder's exit (Balcaen et al., 2012). The entrepreneurial inability to manage efficiently the company was the underlying notion of exit literature (Wennberg et al, 2010). However, the third branch of exit researches is addressed to the developing new various reasons and roots of entrepreneurial exit (Harada, 2007).

The bright example of article about entrepreneurial exit was written by DeTienne D., McKelvie A. and Chandler G. (2015), where they widely discussed the problem of entrepreneurial exit. The authors discover the factors that drive the founder's decision to exit and highlight two types of such variables: individual (age, education, extrinsic rewards and autonomy) and firm-level (size of founding team, innovativeness and size of firm). They research this characteristic on the three types of exit strategy: financial harvest, stewardship and voluntary cessation, and investigate the influence of the above mentioned factors on the entrepreneur's choice of exit strategy.

Such researches describes precisely the personal intentions of exit from the company. However, this approach can not be applied to the large public companies because it needs direct interaction with the firm and hence the question of entrepreneurs' exit from public company is still the urgent topic, that discussed by the modern scientists.

Focusing on the entrepreneurial exit as the personal choice, we can underline several factors of entrepreneurial decision to exit. Firstly, the entrepreneurial satisfaction of his current business: for example, the poor performance and low risks can be the curtail factor of the entrepreneurial intentions to exit. Apart from poor performance indicators, declined risks and low leverage can also serve as the curtail reason for exit. Moreover, we consider such factors as the total option awards paid to the executive officers as the indicator of the founder's authority in the company and the entrepreneur's age to take into consideration cases of founder's death.

Based on findings of family firm creation and exit reasons, we investigate entrepreneurial intentions to following strategies:

H2a: High performance indicators, low risks, low leverage, low company's growth and high option awards paid to the executive officers increase the probability of the family firm creation

H2b: High performance indicators, high risks, high leverage, high company's growth and high option awards paid to the executive officers increase the probability of the entrepreneurial exit strategy



3. Data and summary statistics

3.1 Sample

The data sample of this study targeted the American high-technology firms from the Russel-3000 Index in the pharmaceuticals, biotechnology & life sciences (270 companies), software & services (250 companies) and technology hardware & equipment (122 companies) industries. The primary source of the financial data was Bloomberg database; ownership data and personal characteristics of founders were obtained from Capital IQ database.

We limited the sample of our research by removing from the sample firms, which were created by the mergers, spin-offs, moreover we excluded subsidiaries of other firms, because such types of firms were not founded by entrepreneurs. Finally, we do not take into considerations old companies, where the founder left company before 2004 year.

Table 1 summarizes the characteristics of the final sample for the first part of our analyses, which includes 365 companies from 2004 to 2015 years. These firms' average age is 21.5 years with the average sales growth of 6.3%. It should be noted that this table reflects that male-entrepreneurs account for 86.8% of total sample, while female-entrepreneurs take only 3% of total observations (the rest 32% reflects the companies without entrepreneur).

Table 1

Summary statistics for OLS regression

Variable	Obs	Mean	Std. Dev.	Min	Max
Personal characteristics
Gender	3946	0.953	0.360	0	2
Education	3977	2.210	1.391	0	4
Age	3997	47.109	18.811	0	89
Company's characteristics
industry	4031	1.730	0.712	1	3
Growth	2244	0.391	1.765	-0.753	39.223
Size	3141	6.059	1.703	-3.527	12.579
Leverage	3052	0.297	0.932	0	17.447
Company_age	4031	14.586	10.692	0	69
ROE	2393	0.104	0.428	-2.573	1.733
ROA	2939	0.128	0.360	-4.797	1.801
Q_Tobin	2739	0.038	0.062	0.003	1.439
Beta	3048	1.120	0.581	-14.703	6.106
R&D expenses	2202	3.509	1.813	-5.991	9.416
F.CEO	3921	0.587	0.492	0	1
F.Board	3944	0.873	0.333	0	1
Ownership	2779	9.612	16.524	0	95.7
F.Co-found	3977	1.309	0.644	0	2

It is worth noting that there are significant differences among analyzed industries. The Appendix A. contains information about firms' and founders' features of every industry. The oldest companies operate in the technology and hardware sector, where the average company's age is 20.8 years, while the youngest companies are from software & services and pharmaceuticals sectors and have the average age about 13 years. However, the founders' portrait has a similar characteristics of the pharmaceuticals and technology hardware sectors, where the average founders' age is about 55 years and education is higher than Master degree (MBA, PhD), while the youngest founders are observed in the software industry with the average age of 48 years and average education degree of MD.

For the second part of our research, the primary source of data is Security and Exchange Commission Filings (SEC Filings), where companies are required to disclose the information about the members of board of directors, their personal characteristics and beneficial ownership of stakeholders. Moreover, under the regulation S-K items 401 and 404, companies must disclose any family relationship between executive employees, directors, security holders.

We gather information about family ownership and family ties from the source SEC DEF-14A and information of founder's exit using CapitalIQ database and SEC Filings. Table 2 presents the key information about sample for the research of entrepreneurial intentions. In our sample of high-technology firms we determine that 117 companies out of 335 are the family firms, of those 37 companies have family ties. Regarding exit strategy, we find 104 cases, when the founder or co-founder leaves the company (i.e. the founder does not hold any executive position and does not have any ownership stake in the company's equity).

Table 2 Summary statistics for Logit regression

Variable	Obs	Mean	Std. Dev.	Min	Max
Prob_family	2680	0.498	0.498	0	1
Prob_exit	2611	0.285	0.196	0	1
ROE	2389	-0.104	0.428	-2.572	1.733
Beta	3018	1.118	0.582	-14.703	6.106
Ownership	2766	9.657	16.550	0	95.7
Option_Awards	1484	14.228	1.607	7.490	19.284
Growth	2219	0.395	1.775	-0.753	39.223
Leverage	3032	0.295	0.932	0	17.447
Comp_age	3989	14.586	10.692	0	69

Appendix B. illustrates the specific characteristics of family firms and the firms, where the founder follows the exit strategy. The average family firms age is 20 years and it ranges from 0 to 63 years, which means that some companies originally were created by the family members. The table second table depicts only the year, when the founder has decided to exit. The average age of such companies is about 19 years and they have negative performance indicator, which can be one of the reasons of founder's decision.

3.2 Dependent variables

In the first part of our research, we investigate the influence of the founder's participation in the company's activity based on the OLS regression analyses. To observe the dependence with the company's performance, we analyzed the Q-Tobin coefficient, which illustrates the investors' expectation about the future company's performance due to strategic decisions. To improve the robustness of these results, we also measure the performance by the Return on Equity (ROE) and Return on Assets (ROA), the results of which are presented in the Appendix-D

Testing hypothesis H1, we analyze the influence of the founder's participation on the risks and R&D costs. There are a lot of approaches that suggest different ways to measure the company's risks. (Su Kun et al, 2016; Mafrolla E. et al, 2017). In this study, we consider the firms' risks looking into the beta coefficient. We gather the information about R&D costs from the companies' Income Statement.

In the second part of our research, we use the logit-regression analyses, where in the case of independent variables we apply the probability of the family firm creation or the entrepreneur's exit. This method is the most common econometric approach, which is usually used to determine the probable motives to exit (Zellweger T. et al, 2011; Justo et al, 2015).

Prob_Family - 1 if the entrepreneur involves family members in the company's ownership or management; 0 -else;

Prob_exit - 1 if the entrepreneur doesn't have CEO position, position in the Board of Directors and sales his stake in the company's equity during the research period.

3.3 Independent variables

Table 2 summarizes the description of the independent variables, which we use in the regression analyses.

Table 2. Independent variable description

Variable	Description
F.CEO	= 1 if entrepreneur holds the CEO position; 0 - else
F.Board	= 1 if entrepreneur holds the position in the Board of Directors; 0 - else
Ownership	The entrepreneurial stake in the company's equity
Gender	= 1 if entrepreneur's gender is male; 2 = female; 0 = if the entrepreneur has left the company
Age	The entrepreneur's age
Education	= 4 if entrepreneur's education is PhD; 3 - MBA; 2- MS; 1-BS or less; 0 - if the entrepreneur has left the company
F.Co-found	= 1 if there is a co-founder of the company; 0 -else
Company_age	The number of years from the company's year of incorporation
Ln(Option_Aw)	The natural logarithm of the total option awards paid to the Executive Officers
Size	The natural logarithm of assets size
Growth	The average 3-year growth in the company's sales
Levarage	The total debt to total equity ratio

In establishing the control variables, we chose four general indicators that illustrate the company's size, creditability, its overall growth and company's age.

The Appendix C. illustrates the correlation analyses among the dependent variables. The displayed values can indicate the probable multicollinearity between dependent variables. However, the variance inflation factors (VIF) are not exceed the threshold of 4 that means the absence of multicollinearity in our model.

3.4 Methods

In the first part of our research, we use the OLS regression analyses. Our model looks as follows:

Where Y takes the value of Q-Tobin, Beta and R&D expenses.

In the second part, we tested our hypotheses through the logit regressions, which analyze the entrepreneurial intentions to create family firm.



+

The regression that represented the probable entrepreneur's motives to the exit strategy is following:

+



4. Results

We use the OLS regression analyses to investigate the hypothesized dependences of the first part of our research. Table 6 presents the results of regression, which verified hypotheses H1. The coefficients, which are greater than zero influence positively the dependent variable and the coefficients which are less than zero have the negative impact on dependent variables.

Hypotheses H1 assume that there is a relationship between entrepreneurial involvement and company's performance, risks and R&D expenses. We find strong support only for Hypothesis H1.a that states the entrepreneur, who holds the CEO position, positively influences the company's performance and R&D. These results demonstrate that the founder aims to follow innovative strategy and increases R&D expenses, which can be a probable reason of its high performance, compared to the agent-led companies. However, we decline the Hypothesis H1.a in respect to the founder's position of director, because it is statistically non-significant.

The reversed situation is observed with the hypotheses H1.b. We do not find any significant dependence between the entrepreneur who takes position in the Board of Directors and company's Performance and R&D costs. However, we find that the director position positively influence company's risks. It means that entrepreneur has a greater impact on the decision-making process of acceptance risky projects, when he holds the position in the Board of Directors.

However, Hypothesis H1.c and H1.d are rejected, because we do not found statistically significant correlation between entrepreneur ownership or the presence of co-founder and company's risks and R&D costs. Additionally, we find the slight positive effect of entrepreneur's stake on company's performance. This phenomenon can be explained by the stronger entrepreneur's control on the company's activities with the high ownership stake. Furthermore, our analyses show that the co-founder has a negative influence on the company's ROE, which can indicate that presence of co-founder decreases the founder's control on the decision-making process.

Table 6

OLS regression results

	Perfomance	Risks	R&D expenses
Variable	ROE	Beta	R&D
F.CEO	0,036**	-0,008	0,282***
	(0,090)	(0,697)	(0,000)
F.Board	-0,031	0,101***	0,055
	(0,383)	(0,006)	(0,668)
Ownership	0,001***	-0,001	0,002
	(0,021)	(0,225)	(0,307)
F.Co-found	-0,033**	-0,020	0,033
	(0,066)	(0,288)	(0,611)
Gender	0,031	-0,039	0,081
	(0,406)	(0,315)	(0,618)
Education	0,000	-0,028***	0,141***
	(0,997)	(0,001)	(0,000)
Age	0,001	0,001	-0,013***
	(0,407)	(0,302)	(0,000)
Comp_age	0,008***	0,000	-0,002
	(0,000)	(0,934)	(0,583)
Size	0,048***	-0,021***	0,836***
	(0,000)	(0,001)	(0,000)
Leverage	-0,336***	-0,001	-0,048
	(0,000)	(0,938)	(0,340)
Growth	-0,006	-0,001	0,068***
	(0,192)	(0,904)	(0,000)
Industry	0,126***	0,032***	-0,138***
	(0,000)	(0,018)	(0,006)
Constant	-0,746***	1,222***	-0,914***
	(0,000)	(0,000)	(0,000)
Observations	1546	1730	1164
R2	0,335	0,265	0,621

Standard errors are in parentheses

* p <0.15; ** p<0.1; *** p<0.05

We provide evidence of the influence of founder's personal characteristics. We find that the higher education the founder has, the higher R&D costs is, but lower company's risks are. Moreover, the founder's age negatively influences the company's R&D expenses. These findings in line with the literature related to the dependence of the personal characteristics of human on the risk-aversion. ().

The second part of our research deals with the probable motives of the entrepreneurial strategy. Table 7 presents the results of the logit regression. The coefficients, which are greater than 0 increase the probability of the dependent variable, less than 0 - decrease of probability.

Table 7

Logit regression results

Variable	Prob_Family			Variable	Prob_exit
ROE	0.003***			ROE	0.523
	(0.070)				(0.484)
Growth	0.052			Growth	-0.261
	(0.173)				(0.381)
Ln(R&D)	0.001			Ln(R&D)	0.133
	(0.781)				(0.600)
Beta	0.272			Beta	-1.051***
	(0.267)				(0.029)
Option_Award	0.000*			Option_award	0.377
	(0.114)				(0.186)
Ownership	0.025***			Ownership	-0.390
	(0.011)				0.011
Age	0.024			Age	-0.067***
	(0.112)				(0.000)
Comp_age	-0.043***			Comp_age	0.005
	(0.000)				(0.873)
Constant	8.405			Constant	-4.018
	(0.000)				0.260
Observations	538			Observations	566
R2	0.096			R2	0.0835

Standard errors are in parentheses

* p <0.15; ** p<0.1; *** p<0.05

We conclude that the higher company's ROE is, the higher entrepreneur's intentions of the family firm creation, which is consistent with the definition of family firms. If the company has high performance indicators, the founder more probably involve family members in business in order to control it. Moreover, high option awards and ownership stake mean that the founder is already has a significant control under the company, that is why he can more likely create family business and take the entrenchment strategy. However, such indicators as risks, R&D costs, and company's growth do not influence the family firms creation probability. long term strategy motive

In the case of exit strategy, we can conclude that the only reasons why entrepreneur can exit from the Company are the declined risks and founder's age. We confirm that the entrepreneurs usually accept risk-taking strategy, that is why the declined risks can be the indicator that the entrepreneur lose control of the decision-making process. The second indicator that influence his decision is age. In other words, the older entrepreneurs have higher probability to follow exit strategy and sale their stake in the company. We can assume that reasonable explanation of this phenomena van be that the too old founders can exit the Company because of their retirement or death.



5. Discussions of results

The obtained results of our paper shows that there is the relationship between the founder's involvement in the company and its performance, risks and R&D costs. These results correspond with the main characteristics of the entrepreneur, such as risk-taking, innovative and proactive person. We show that the founder, who takes the CEO position, is more likely influence the R&D expenses and the company's performance, while the founder, who serves as the director, is more likely has an impact on the company's risks. These findings seem to suggest that the founder, who takes the director position, has a control of the decision-making process and prefers to take more risky projects. Moreover, we confirm that the entrepreneurial personal characteristics also has a significant impact on the level of the company's risks and R&D costs. Overall, our analyses of the first part of work provide evidence that the company's founder follows entrepreneurial orientation strategy and has a strong effect on the company's activities. We contribute to previous works, which study the entrepreneur's influence on the example of private firms, on the implication of our analyses on the sample of public high-technology companies. However, the main limitation of this part of our research is that we consider only the founder as the main entrepreneurs of the company and, also, we exclude the old companies, where the founder has left the firm. These approach neglects the companies with the other types of entrepreneurs.

In the second part of our research, we determine the main reasons of entrepreneur's behavior on the long-term horizon. Firstly, we find strong support that the declined risks increase the probability of entrepreneur's exit. This thesis can be the evidence that the entrepreneur, who usually follows risk-taking strategy, lose the control over the company's decisions about project acceptance. Moreover, the founder's age also play significant role in the exit strategy, but we believe that such result is obtained due to the inability to determine the cases, when the founder leaves the company due to his death. Regarding to the family firm creation, we find strong evidence that the high ROE indicator increase the probability that founder engage in company's management or in ownership family members. These results are consistent with the theory that family firms entrenchment in order to benefit from high firm's performance.



Conclusion

The research of the entrepreneurial influence on the company has repeatedly reveals that the entrepreneur plays a crucial role in the company's activities. In this article we find support that the degree of entrepreneur's involvement in company influence differently the performance, risks and R&D expenses. We verify our hypothesis on the sample of high-technology companies between 2004 and 2015, where the largest number of new firm creation is observed over the past decade. Our findings suggest that the entrepreneur, who holds CEO position, influence the company's R&D expenses and performance, while the entrepreneur, who serves as a Director, has an impact on the company's risks. Moreover, there is a slight positive dependence between entrepreneurial ownership and company's performance.

In the second part of our research, we shed the light on the issue of the probable motives of entrepreneur's behavior. Firstly, we determine the declined risks increase the probability entrepreneur's exit strategy. While high performance indicators are the indicators that the founder will create the family firm. Moreover, personal characteristics, such as founder's age, also influence the founder's decision to exit the company. The older entrepreneur is, the higher probability of exit is.



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Appendix

A. The mean values of company' and founder' characteristics

	Pharmaceuticals	Software	Technology hardware
Personal characteristics
Gender	1.048	1.053	1.024
Education	3.180	1.930	2.187
Age	54.835	48.653	56.185
Company's characteristics
Company_age	12.613	14.274	20.862
Size	5.740	6.225	6.464
Growth	0.529	0.316	0.243
Leverage	0.439	0.217	0.151

B. The characteristics of family firms

Variable	Obs	Mean	Std. Dev.	Min	Max
ROE	1034	0.04065	0.373014	-1.981454	1.733041
Beta	1107	1.158869	0.428316	-3.5138	4.5441
Ownership	1149	13.98085	19.83081	0	95.7
Option_Awards	550	14.22097	1.669517	7.489971	18.73046
Growth	848	0.502811	2.37377	-0.222656	26.99541
Leverage	1120	0.249256	0.837873	0	15.6277
Company_age	1228	19.94381	10.70152	0	63

The characteristics of firms when the founder exits

Variable	Obs	Mean	Std. Dev.	Min	Max
ROE	97	-0.09718	0.344946	-1.596385	0.592126
Beta	94	1.037455	0.388824	-0.2691	2.0325
Ownership	103	3.898767	8.253988	0	33.49
Option_Award	49	14.3909	1.13101	12.09438	16.84256
Growth	73	0.2846	0.510622	-0.181935	3.799465
Leverage	98	0.237512	0.645956	0	5.973706
Company_age	104	19.05769	9.75608	3	60



C. Correlation matrix

Variable

F.CEO

F.Board

Ownership

F.Co-found

Gender

Education

Age

Company_age

Growth

Leverage

Size

F.CEO

1

F.Board

0.653*

1

(0.000)

Ownership

0.339*

0.381*

1

(0.000)

(0.000)

F.Co-found

0.498*

0.776*

0.271*

1

(0.000)

(0.000)

(0.000)

Gender

0.518*

0.803*

0.359*

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