Parkes, Richard (2020) Why do founders exit their firms by transferring them to employee ownership? (PhD thesis), Kingston University, .
Abstract
Every founder who establishes a business must, at some point in their life, exit from it. The ageing population of business owners and the consequences that arise from their exits is increasingly bringing into view the significance of this issue for society and the economy. However, whilst much is known about the considerable heterogeneity that founders demonstrate in their motivation and behaviour at venture start-up, little is known about this heterogeneity at exit. This thesis considers the current state of knowledge in relation to entrepreneurial exit. It examines the reasons why founders exit their firms by transferring them to employee ownership in preference to other exit choices. The results of its research, generated by inductive, qualitative enquiry with theory building as its goal, describe how founders pursue transfer of their firms to employee ownership as a legacy outcome. The desire to create a legacy through the continuance of the business, in a form that is consistent with the self-concept of the founder, outranks financial maximisation considerations at exit. The lens of identity theory is utilised to view individual-level legacy motivation and actions at exit, incorporating legacy orientation, stewarding the legacy into being and protecting the legacy from loss. Identity theory is appearing with greater frequency in the entrepreneurship literature but is largely absent in studies of entrepreneurial exit. The concept of 'entrepreneurial legacy imprinting', introduced by this thesis, is informed by three identity-based theoretical constructs (social identity, role identity and loss aversion, including identity loss) as a novel contribution to better understand the exit motivation and behaviour of business founders. The thesis highlights the need for business support policy and practice to address the widespread ignorance towards employee ownership as a founder exit outcome and the scepticism held towards it by many professional advisers. Failure to do so will continue to exclude an otherwise viable exit pathway to those who desire a legacy solution for the continuance of their business.
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