Director turnover in new venture boards: From homophilous to resource-contingent processes

Abstract

While resource-dependency theories suggest that heterogenous directors in new venture boards contribute important knowledge and networks, research on boardroom homophily highlights that dissimilar directors are more likely to leave, especially under adverse conditions. To date, there is limited evidence on whether such mechanisms also prevail in the venture context where founder-managers retain excessive control over director appointments. We analyze director tenure in 28,295 Swedish ventures, finding that dissimilar directors are more likely to leave the board when ventures are operating in favorable conditions but only when considering knowledge diversity. Post-hoc analyses of directors' post-exit career paths and qualitative interviews with CEOs and directors help clarify the mechanisms that cause diverse directors to depart venture boards more often. Specifically, lifecycle demands and venture profitability ease resource-dependence pressures on director retention, thus feeding homogeneity in board expertise. Our findings provide insights into the homogenizing nature of new ventures' upper echelons as they evolve into mature organizations.

Executive summary

Boards are a vital resource for early-stage ventures, offering advice, funding connections, and strategic guidance — especially when directors bring diverse expertise. Yet, as ventures grow and succeed, that diversity can erode. Our study of over 28,000 Swedish owner-managed firms shows that directors whose expertise differs from that of the founder(s) are more likely to leave—not during hardship, but when the business is performing well. Interviews with several founders and directors further suggest that as ventures mature, they increasingly rely on internal capabilities and shift toward boards that reflect the founder's evolving preferences. These dynamics lead to more homogenous boards over time, potentially narrowing the range of perspectives available in the board. For founders and policymakers, the findings highlight a key challenge: keeping diverse directors around not just at the start, but as the company scales.