The sandwich game: Founder-CEOs and forecasting as impression management

Abstract

Drawing on impression management and social exchange theory, we examine the use of positively biased forecasts by (non-)founder-CEOs as an impression management tactic vis-` a-vis their existing investors. Contrary to their non-founder counterparts, founder-CEOs identify more with the venture they founded and, therefore, experience greater instrumental and affective concerns about the long-term relationship with their investors. Consequently, we hypothesize that founder CEOs will strategically provide less positively biased forecasts to their investors than non-founder CEOs. Using two independent samples with revenue forecasts reported to different venture capital investors and a causal chain scenario study consisting of two experiments, we find consistent support for our hypothesis. Overall, this study provides new insights into the use of forecasts as a post-investment impression management tactic by distinct types of CEOs in entrepreneurial ventures.