Experience-Based Human Capital and Social Capital of Outside Directors

Abstract

In this article, the authors develop and test a theoretical model of the effects of outside directors' human and social capital on firm growth. They posit that outside directors' board memberships and managerial experiences have additive and interactive effects. Using a longitudinal sample of high technology firms, they test their theory and find that outside directors' membership on multiple boards, industry-specific managerial experience, and firm-specific founding experience have strong additive effects on firm growth. They also find negative interaction effects, indicating the costs of acquiring and combining certain types of outside director human and social capital within the board.