New research from Duke University’s Fuqua School of Business in Durham, North Carolina, suggests that talented and confident entrepreneurs are more likely to name their firms after themselves—a move that can be risky but rewarding. Professors Sharon Belenzon, Aaron Chatterji, and Brendan Daley found that when these self-naming entrepreneurs succeed, their businesses are more successful than those with anonymous names.
The researchers studied more than a million firms in Europe, controlling for age and ownership structure, and found that fewer than one in five were named for their founders. But they also learned that the return on assets for those eponymous firms was 3 percentage points better than it was for similar, noneponymous companies.
“Conventional wisdom says you should never name a firm after yourself because it demonstrates a lack of creativity and hurts resale value, since most buyers won’t want to be tied to a previous owner’s name,” Chatterji says.
But the researchers conclude that people who are more confident in their ability to succeed are more likely to strengthen their attachment to a firm by naming it after themselves. “Our theory is that they are raising the stakes by betting their own names on the success of their companies,” says Daley.
Entrepreneurs with common names are more willing to bestow those names on their firms because they’re less likely to be associated with failure if the firm doesn’t succeed, says Daley. But when people with unusual names choose to name companies after themselves, the performance effects are magnified.
“Our theory is that only the best of the best will name a firm after themselves if their names are unusual, because there’s more at stake,” says Chatterji. “The only people willing to do it are those who aren’t as worried about the downside because they are confident their ability will bring them success.”
Nonetheless, the naming decision is no guarantee of quality, Chatterji points out, although it can be a powerful indicator of who’s behind a firm. He says, “In entrepreneurship, it matters how attached the individual is to the firm. At the beginning, the founder and the firm can almost be like one entity, and our research offers one of the first glimpses of how important that attachment can be.”
"Eponymous Entrepreneurs” appears in the June 2017 issue of American Economic Review. Read it here.