Outside Board Availability and Composition in High Tech Start-Ups

Abstract

Boards in large organizations have been subject to much empirical research, however, boards in start-ups have been a largely neglected research topic. The dearth of research into boards in start-up companies is surprising as since the early nineties high tech start-ups have increasingly become multi-stakeholder firms due to the increased availability of venture capital finance and the increased interest by public research organizations (including universities) in academic spin-outs. In this paper we address this gap in literature by examining the issue of board composition in high tech start-ups and, in particular, what determines the composition of the board in these start-ups. We draw on agency theory, resource dependence theory and social network theory to examine the tensions that exist between the founding team and other stakeholders in determining board composition. Our results provide evidence that teams that have powerful external stakeholders are more likely to develop boards that have complementary skills. Conversely, in start-ups where the founding team has had autonomy in composing their own board the team tends to look for outside board members with similar human capital.