The scholarly field of entrepreneurship has focused relatively little attention on how the leadership behaviors of business founders impact the perceptions of their employees and the overall performance of their business ventures. Using the theory-driven Authentic Leadership Model (Luthans & Avolio, 2003) as a framework, this study examines how the psychological capital (Luthans, et al., in press) of business founders (i.e., self-efficacy, state optimism, resiliency, and state hope) relates to the perceptions of leadership within newer, smaller firms and further, how those leadership perceptions relate to both financial and attitudinal business performance outcomes.; Data obtained from both business founders (N = 62) and associates (N = 179) indicate that a business founder's self-efficacy, state optimism, resiliency, and state hope each bear significant relationships to how authentic that business founder perceives his/her leadership approach. A business founder's state optimism was also found to be significantly correlated with the associates' perception of authentic leadership within an organization.; The business founder's perception of authentic leadership demonstrated significant correlations with the reported sales growth and market share growth of a firm, as well as the business founder's work happiness. Further, authentic leadership was found to mediate the relationship between founder self-efficacy and work happiness. Significant direct relationships were also noted between a business founder's psychological capital and the founder's job satisfaction.; The associates' perception of authentic leadership was also significantly related to the market share growth of the firm, as well as the associates' reported job satisfaction, organizational commitment, and work happiness.; This study served as an initial empirical step toward applying authentic leadership theory within the context of newer, smaller organizations. While further research is needed to more fully explore the relationships evidenced in the study, these initial findings suggest the importance of recognizing and developing the positive cognitive strengths and authentic leadership of entrepreneurs.
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