Abstract
Board composition in large organizations has been subject to much empirical research, however, little attention has been focused on board composition in start-ups, and more specifically high tech start-ups. This lack of research is surprising given that many high tech start-ups have multiple equity stakeholders such as venture capitalists or public research organizations, such as universities. Given that high tech start-ups are commonly resource-poor these external stakeholders may play an important role in accessing critical external resources. Drawing on agency theory, resource dependence theory and social network theory we examine the tensions that exist between the founding team and external equity stakeholders in determining the presence of outside board members. In particular we focus on whether or not the outside board members have either complementary or substitute human capital to the founding team. We test our model on a sample of 140 high tech start-ups in Flanders. Our results indicate that high tech start-ups with a public research organization as an external equity stakeholder are more likely to develop boards with outside board members with complementary skills to the founding team.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Aldrich H. (1999) Using an Ecological Perspective to Study Organizational Founding Dates. Entrepreneurship Theory and Practice 14(3): 7–24.
Aldrich H. A., Auster E. (1986) Even Dwarf Started Small: Liabilities of Size and Age and their Strategic Implications. In: B. Staw, L. L. Cummings (eds) Research in Organizational Behavior, Vol. 8, JAI Press, Greenwich, Conn, 165–198.
Allen K. R., Taylor C. C. (2005) Bringing Engineering Research to Market: How Universities, Industry, and Government are Attempting to Solve the Problem. Engineering Management Journal 17(3): 42–48.
Autio E., Sapienza H. J., Almeida J. G. (2000) Effects of Age at Entry, Knowledge Intensity, and Imitability of International Growth. Academy of Management Journal 43(5): 909–924.
Becker G. S. (1975) Human Capital. Chicago University Press, Chicago, IL.
Blau P. M. (1964) Exchange and Power in Social Life. New York, John Wiley.
Bray M. J., Lee J. N. (2000) University Revenues from Technology Transfer: Licensing Fees vs. Equity Positions. Journal of Business Venturing 15(5–6): 385–392.
Cantwell J., Iammarino S. (2001) EU Regions and Multinational Corporations: Change, Stability and Strengthening of Technological Comparative Advantages. Industrial and Corporate Change 10(4): 1007–1037.
Carter N. M., Stearns T. M., Reynolds P. D., Miller B. A. (1994) New Venture Strategies: Theory Development with an Empirical Base. Strategic Management Journal 15: 21–41.
Certo S. T., Daily C. M., Dalton D. R. (2001) Signaling Firm Value Through Board Structure: An Investigation of Initial Public Offerings. Entrepreneurship Theory and Practice 26(2): 33–50.
Clarkson M. (1995) A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. Academy of Management Review 20(1): 92–117.
Clarysse B., Moray N. (2004) A Process Study of Entrepreneurial Team Formation: The Case of a Research-Based Spin-Off. Journal of Business Venturing 19(1): 55–80.
Cooper A. C., Gimeno-Gascon F. J., Woo C. Y. (1994) Initial Human and Financial Capital as Predictors of New Venture Performance. Journal of Business Venturing 9: 371–395.
Daily C. M., Johnson J. L, Ellstrand A. E., Dalton D. R. (1998) Compensation Committee Composition as a Determinant of CEO Compensation. Academy of Management Journal 41(2): 209–221.
Daily C. M., McDougall P. P., Covin J. G., Dalton D. R. (2002) Governance and Strategic Leadership in Entrepreneurial Firms. Journal of Management. 28(3): 387–412.
Deakins D., O’Neill E., Mileham P. (2000) The Role and Influence of External Directors in Small, Entrepreneurial Companies: Some Evidence on VC and Non-VC Appointed External Directors. Venture Capital 2: 111–127.
Deutsch Y., Ross T. W. (2003) You Are Known by the Directors You Keep: Reputable Directors as a Signaling Mechanism for Young Firms. Management Science 49(8): 1003–1017.
Dimaggio P. J., Powell W. W. (1983) The Iron Cage Revisited: Institution Isomorphism and Collective Rationality in Organisational Fields. American Sociological Review 48: 147–160.
Dimovsky B., Brooks R. (2004) Shareholder Representation on the Boards of Australian Initial Public Offerings. Applied Financial Economics 14(17): 1233–1238.
Eisenhardt K. (1989) Agency Theory: An Assessment and Review. Academy of Management Review 14: 57–74.
EVCA, 2004, Annual Survey of Pan-European Private Equity and Venture Capital Activity. EVCA Yearbook 2004. Brussels.
Fama E., Jensen M. (1983) Separation of Ownership and Control. Journal of Law and Economics 26: 301–325.
Fiegener, M. K., Brown, B. M., Dreux, D. R. and William, J. D. 2000, ‚CEO Stakes and Board Composition in Small Private Firms’, Entrepreneurship Theory and Practice Summer, 5–24.
Filatotchev I., Wright M. (2005) The Corporate Governance Life-Cycle. In: I. Filatotchev, M. Wright (eds) Corporate Governance Life-Cycle, London, New York: Edward Elgar.
Forbes D. P., Borchert P. S., Zellmer-Bruhn, M. E., Sapienza H. J. (2006) Entrepreneurial Team Formation: An Exploration of New Member Addition. Entrepreneurship Theory and Practice 30(20): 225–248.
Fried V. H., Bruton G. D., Hisrich R. D. (1998) Strategy and the Board of Directors in Venture Capital-Backed Firms. Journal of Business Venturing 13(6): 493–504.
Gabrielsson J., Huse M. (2005) “Outside” Directors in SME Boards: A Call for Theoretical Reflections. Corporate Board: Role, Duties and Composition 1(1): 28–37.
Gompers P., Lerner J. (2001) The Venture Capital Revolution. Journal of Economic Perspectives 15(2): 145–168.
Gorman M., Sahlman W. A. (1989) What Do Venture Capitalists Do? Journal of Business Venturing 4(4): 231–249.
Granovetter M. (1985) Economic Action and Social Structure: The Problem of Embeddedness. American Journal of Sociology 91(3): 481–510.
Greene W. H. (2000) Econometric Analysis. New Jersey: Prentice-Hall.
Hair J. F., Anderson R. E., Tathum R. L., Black W. C. (1998) Multivariate Data Analysis with Readings. New York: Macmillan.
Hannan M. T., Freeman J. (1977) The Population Ecology of Organizations. American Journal of Sociology 88: 1116–1145.
Heirman, A., 2004, ‚From Invention to Innovation: A Study of Research-Based Start-Ups’. Unpublished doctoral dissertation, University of Gent.
Heirman, A. and B. Clarysse, 2005, ‚Do Intangible Assets at Start-Up Matter for Innovation Speed?’ In: Zahra et al. (eds.), Frontiers of Entrepreneurship Research 2004, Massachusetts: Arthur M. Blank Center for Entrepreneurship Babson College, 279–291.
Henderson A. (1999) Firm Strategy and Age Dependence: A Contingent View of Liabilities of Newness, Adolescence, and Obsolescence. Administrative Science Quarterly 44(2): 281–314.
Hillman A. J., Dalziel T. (2003) Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives. Academy of Management Review 28(3): 383–397.
Huse, M., 1998, `Researching the Dynamics of Board-Stakeholder Relations', Long Range Planning 22(1), 218–226
Huse M. (2000) Boards of Directors in SMEs: A Review and Research Agenda. Entrepreneurship and Regional Development 12(4): 271–290.
Huse M. (2005) Accountability and Creating Accountability: A Framework for Exploring Behavioural Perspectives of Corporate Governance. British Journal of Management 16: 65–79.
Jensen M. C., Meckling W. H. (1976) Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics 3: 305–360.
Kale S., Arditi D. (1998) Business Failures: Liabilities of Newness, Adolescence, and Smallness. Journal of Construction Engineering and Management 124(6): 458–465.
Knockaert, M., 2005, Unpublished Ph.D. Dissertation, University of Gent.
Knockaert M., Lockett A., Clarysse B., Wright M. (2006) Do Human Capital and Fund Characteristics Drive Follow-Up Behaviour of Early Stage High Tech VCs? International Journal of Technology Management 34(1–2): 7–27.
Lynall M. D., Golden B. R., Hillman A. (2003) Board Composition From Adolescence to Maturity: A Multitheoretic View. Academy of Management Review 28(3): 416–432.
Mitchell F., Reid G., Terry N. (1997) Venture Capital Supply and Accounting Information System Development. Entrepreneurship Theory and Practice 21(4): 45–62.
Nicolaou N., Birley S. (2003) Social Networks in Organizational Emergence: The University Spinout Phenomenon. Management Science 49(12): 1702–1725.
Pfeffer J., Salancik G. (1978) The External Control of Organizations: A Resource Dependence Perspective. New York, Harper & Row.
Pruthi S., Wright M., Lockett A. (2003) Do Foreign and Domestic Venture Capital Firms Differ in their Monitoring of Investees? Asia Pacific Journal of Management 20: 175–204.
Roberts E. B. (1991) Entrepreneurs in High Technology: Lessons From MIT and Beyond. Oxford University Press, New York.
Rosenstein J. (1988) The Board and Strategy: Venture Capital and High Technology. Journal of Business Venturing 3: 159–170.
Rosenstein J., Bruno A. V., Bygrave W. D., Taylor N. (1993) The CEO, Venture Capitalists and the Board. Journal of Business Venturing 8: 99–113.
Sapienza H. J. (1992) When Do Venture Capitalists Add Value? Journal of Business Venturing 7: 9–27.
Schartinger D., Rammer C., Gassler H., Schibany A., Polt W. (2002) Benchmarking Industry-Science Relations: The Role of Framework Conditions. Science and Public Policy 28(4): 247–258.
Schmoch U. (1999) Interaction of Universities and Industrial Enterprises in Germany and the United States – A Comparison. Industry and Innovation 6(1): 51–68.
Serageldin I., Dagupta P. (2001) Social Capital: A Multifaceted Perspective. City, Worldbank Publications.
Teachman J. D. (1980) Analysis of Population Diversity. Sociological Methods and Research 1: 149–177.
Ucbasaran D., Lockett A., Wright M., Westhead P. (2003) Entrepreneurial Founder Teams: Factors Associated with Members Entry and Exit. Entrepreneurship Theory and Practice 28(2): 107–128.
Uzzi B. (1997) Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness. Administrative Science Quarterly 42(1): 37–69.
Ward J.L. (1989) Defining and Researching Inside Versus Outside Directors: A Rebuttal to the Rebuttal. Family Business Review 2(2): 147–150.
Wasserman, N. and W. Boeker, 2005, ‚Mentoring and Monitoring: The Evolution of Boards of Directors in New Ventures’. Paper presented at the Babson Kaufmann Entrepreneurship Conference 2005.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Clarysse, B., Knockaert, M. & Lockett, A. Outside Board Members in High Tech Start-ups. Small Bus Econ 29, 243–259 (2007). https://doi.org/10.1007/s11187-006-9033-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-006-9033-y
Keywords
- agency theory
- board
- board composition
- corporate governance
- founding teams
- high tech start-up
- resource dependency
- university spin-off
- venture capital