Search results

NEJE Editors interview Cindi Bigelow: director of activities at Bigelow Tea

As on previous occasions, the editors of the New England Journal of Entrepreneurship have sought to interview local small businessowners as well as entrepreneurs who have national reputations. One such small business operator is Allan Lichter, coowner of Millennium Graphics in Bridgeport, Connecticut. Mr. Lichterʼs story is certainly unique to him and to his partner, but readers may resonate with portions of this story as to how challenging it can be to surmount the ups and downs of the business cycle.

Boards of directors often attempt to foster corporate entrepreneurship by replacing a firmʼs chief executive officer (CEO). Compelling theoretical arguments and anecdotal evidence suggest that when firm performance has suffered, a new CEO is best suited to lead the firmʼs creative endeavors. On the other hand, among firms that retain their existing CEO after a decline in performance, manipulating the CEOʼs compensation package is a common governance practice used by boards to encourage innovation. In these cases, some have argued that increasing the CEOʼs pay will encourage corporate entrepreneurship, because the CEO has been compensated for assuming additional risk. Counter to these propositions, this study develops theoretical arguments that a firmʼs existing CEO is better equipped to foster corporate entrepreneurship and that this probability increases when the CEOʼs cash compensation is decreased. Results from a sample of 100 single-product manufacturing firms suggest firms that retain their current CEO and decrease the CEOʼs cash compensation are most likely to engage in corporate entrepreneurship. Implications that this research has for corporate entrepreneurship, corporate governance, and firm performance are discussed.