Eponymous Entrepreneurs

Abstract

We demonstrate that eponymy-firms being named after their owners-is linked to superior firm performance, but is relatively uncommon (about 19 percent of firms in our data). We propose an explanation based on eponymy creating an association between the entrepreneur and her firm that increases the reputational benefits/costs of successful/unsuccessful outcomes. We develop a corresponding signaling model, which further predicts that these effects will be stronger for entrepreneurs with rarer names. We find support for the model's predictions using a unique panel dataset consisting of over 1.8 million firms. (JEL D82, L25, L26, M13) Many firms are eponymously named; that is, they bear the name of their owner. Leveraging a unique panel dataset, this paper demonstrates that eponymy is linked to superior firm performance. For instance, controlling for other characteristics, eponymous ventures generate, on average, a 3 percentage point greater return on assets (ROA), which is 35 to 55 percent of the magnitude of the relevant sample-average ROA.We propose a signaling explanation for the eponymy-performance relationship. Specifically, eponymy creates a stronger association between the entrepreneur and her firm that increases the reputational benefits or costs of having the market hold a favorable or unfavorable impression of her ability (or of the quality of her firm). Consequently, high-ability entrepreneurs are more drawn to eponymy than are low-ability ones.To formalize this explanation, we introduce a model, characterize its equilibrium, and derive its testable implications. We then demonstrate that the evidence is consistent with the predictions of the theory, using novel panel data on over 1.8 million European firms, covering the years 2002-2012.Eponymous Firms.-While there is growing interest in identifying firm characteristics associated with superior entrepreneurial performance, rarely do such characteristics represent choices available to all entrepreneurs. Selecting the name * Belenzon: The Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708 (e-mail: sharon.belenzon@duke.edu); Chatterji: The Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708 (e-mail: ronnie@duke.edu); Daley: The Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708 (e-mail: bd28@duke.edu). The authors thank three anonymous referees and seminar participants at Harvard, MIT, Stanford, Northwestern, NBER, UCLA, and UVA for their useful comments. Chatterji gratefully acknowledges support from the Kauffman Foundation. The authors declare that they have no relevant or material financial interests that relate to the research described in this paper.† Go to https://doi.org/10.1257/aer.20141524 to visit the article page for additional materials and author disclosure statement(s).1639 Belenzon et al.: eponymous entrepreneurs Vol. 107 no. 6 of their firm, however, is an important and highly visible choice all new-business owners must make. Further, the entrepreneur is most li...

The impact of institutions on the competitive advantage of publicly listed family firms in emerging markets

“…Deephouse and Jaskiewicz (2013) found, for example, that PFFs owe their good reputations to the ambassadorial roles family members take up in them. Moreover, Belenzon, Chatterji, and Daley (2017) found that eponymy-the practice of firms being named after the families who own them-signals firm quality and ability. PFF leaders are also less likely to cause principalprincipal problems because they derive socioemotional wealth from preserving the family legacy (Deephouse & Jaskiewicz, 2013;Leitterstorf & Rau, 2014).…”

Where is Silicon Valley?

“…We estimate outcomes on the basis of a small number of start-up characteristics: (i) firm name characteristics, including whether the firm name is eponymous [named after the founder ( 14)], is short or long, is associated with local business activity or regionally traded clusters (e.g., dry cleaning versus manufactured goods), or is associated with a set of high-technology industry clusters ( 15,16); (ii) how the firm is registered, including whether it is a corporation [rather than partnership or limited liability company (LLC)] and whether it is incorporated in Delaware ( 17); and (iii) whether the firm establishes control over formal intellectual property (IP) rights within 1 year of registration ( 18).…”

Financial performance of eponymous firms in the Czech Republic

“…The choice of a firm's name is a deliberate process where the aim may be to inform consumers, for example, about the quality or price of the product (McDevitt, 2014) or to present a particular social identity (Belenzon et al, 2017). At the same time, according to Tadelis (1999), a firm is a "bearer of reputation".…”

“…Bach and Serrano-Velarde (2015) assumed that eponymous firms were family businesses and used the match between CEO surname and firm name to show that in eponymous firms, there is a stronger propensity to dynastic succession. In a recent study, Belenzon et al (2017) showed that eponymy is related to superior profitability as measured by the return on assets. The authors assume that eponymy creates a link between the founder and the firm, which results in reputational concerns.…”

“…Overall, there is very little literature available when it comes to eponymous firms. One of the first studies devoted exclusively to this topic is the paper by Belenzon et al (2017). In their dataset based on Western European countries, 12% to 13% of firms bore the owner's name.…”