The study, published in the International Journal of Entrepreneurial Behaviour & Research, examines how founders see themselves – their identity - influences their decisions in the face of shocks, such as the COVID-19 pandemic, and the consequences that these decisions have on their firms.
The team interviewed founders of 15 high-technology firms in Europe and the United States. They identified three common ways businesses responded to crises: surviving the situation by making minor adjustments to their products and activities, mitigating the crisis through gradual changes in their operations, and seeking to align with the new order by engaging in significant transformations of their products or activities.
The path each firm took depended less on the resources they had available and more on how the founder defined their role within their firm. Entrepreneurial founders, who viewed themselves as opportunity seekers, were more likely to pivot into new markets or develop new products. One firm led by such an entrepreneurial founder, for example, quickly created a virtual property tour service when face-to-face viewings became impossible. Technical expert founders, who identified themselves by their specialist knowledge, focused more narrowly on addressing immediate challenges, such as supply shortages or cash flow issues, and often aimed to weather the storm rather than make significant changes to capitalise on new opportunities.
The research shows that founders’ identity – how they view their role within the firms - acts like an information filter, shaping what information founders notice, and whether they interpret it positively or negatively. By filtering the information founders rely on to inform their decision-making, founders' self-image directs their responses to crisis. It helps explain why firms facing the same disruption can react so differently.
We often think crises force leaders to reinvent themselves. In fact, most founders double down on who they already believe themselves to be, and that self-image drives the direction their firm takes. Major changes in the directions firms take following crises come from who the founders already were before the crisis struck.Professor Bunduchi
Understanding how identity shapes decisions can help boards and investors support founders more effectively. If we know what drives their thinking, we can work with them to explore different options and prepare their businesses for future shocks.Professor Cooper
The study suggests that crises rarely trigger identity change but instead reinforce it. Boards, investors and support agencies should take this into account when advising businesses, making founders’ role expectations clear and exploring how these influence strategic choices. Recognising the role of identity can help firms prepare better for shocks and open up alternative ways of responding.
Raluca Bunduchi is our Personal Chair of Innovation.
Sarah Cooper is our Personal Chair in Entrepreneurship & Enterprise Development, and Deputy Director of Faculty.