Do Returnee CEOs Transfer Institutions? Evidence from Newly Public Chinese Entrepreneurial Firms

This article proposes that returnee entrepreneurs transfer their tacit knowledge of foreign institutions, which can help entrepreneurial firms overcome the formalization challenges they face during times of transition. The results of 355 newly public Chinese entrepreneurial firms indicate that returnee CEOs, especially those who have returned from countries with advanced legal institutions or a national culture of low power distance and individualism, increase post-IPO performance. The evidence is consistent with the tacit knowledge transfer view and not driven by resource transfer or endogeneity issues. Furthermore, we find that venture capital funds facilitate the knowledge transfer, especially when both VCs and CEOs are from countries with advanced institutions.