Design Characteristics Associated with Venture Capital Acquisitions in Academic Spin-offs

Abstract

This dissertation addresses the under-studied area of the role of the top management team (TMT) and board of directors in the development of academic spin-off companies (ASOs) originating from public research institutes. ASO research receives growing attention internationally following the rise in commercialization activities in the vast majority of universities. The studies identify the barriers to and facilitators of ASO formation and growth, which are related to faculty attributes and incentives, university technology transfer policies and practices, and the external environment. Few studies examine the founding team demonstrating that it evolves in to a TMT and board during legal incorporation and that the TMT heterogeneity has significant performance consequences. Even fewer studies investigate the board in ASOs. This is surprising since well-networked outside directors may contribute to ASO development by increasing a firm’s legitimacy and thus reducing liabilities of newness and providing access to critical external resources that young ASOs need to survive. In this dissertation I therefore contribute by addressing this research gap and I explore the board formation and changes in board composition and try to relate these changes to the development stages of an ASO. Given limited prior research on board dynamics I employ an inductive multiple case research design. I also examine the role of the board in accessing needed external managerial resources and how the board and TMT themselves can be valuable resources that help an ASO to achieve the important entrepreneurial milestone of acquiring venture capital. For these studies the data on 135 ASOs in Norway are collected and analyzed using logistic regression. I find that the dynamics of the development stages in an ASO is related to the dynamics of its board. In successful ASOs the board contribution is dynamic. The board chair’s social networks seem to be essential when attracting key members to the board of an ASO. Key board members bring in needed resources that the TMT lacks, ranging from finance and industry experience in earlier stages to executive and marketing/sales experience in later development stages. Thus, they help an ASO to prove a venture’s viability and approach a stage of sustainable returns. Board size and networking appear to be important when recruiting new TMT members with necessary competences who open for new growth opportunities. ASOs that have value adding boards and TMT members with diverse functional and industry backgrounds succeed in recruiting new team members and acquiring venture capital. The likelihood of attracting venture capital increases if ASOs have previously managed to receive seed capital and support from industrial partners.