Two heads are safer than one: Changes in CEO duality and venture failure

We study the dynamics of a major design choice in the governance of ventures: whether to distribute power at the top of the venture between a separate CEO and board chair. We propose that ventures are more likely to combine (separate) their CEO and chair positions when operational performance is poor (strong), demonstrating behavior in line with the threat rigidity thesis. Paradoxically, however, ventures would most benefit from a separate CEO and board chair when operational performance is poor. Empirical analysis of data from the Australian mining industry offers general support for our theory, with some interesting nuances. We discuss the implications of our findings for emerging conversations in the literatures on venture boards, boards of directors, and entrepreneurship.

Automated summary

This study examines the dynamics of a crucial design choice in venture governance - the distribution of power at the top between a separate CEO and board chair. The findings suggest that ventures are more likely to combine their CEO and chair positions when operational performance is weak, but paradoxically, separating these positions would be most beneficial for ventures in such situations. Empirical analysis of data from the Australian mining industry supports this theory, with some interesting nuances. The implications of these findings for the literatures on venture boards, boards of directors, and entrepreneurship are discussed.