Outside Board Human Capital as Catalyst for Early Stage High Tech Firm Performance

Abstract

Early stage high tech firms are confronted with a number of challenges and liabilities which are largely related to the often homogeneous and technical nature of the start-up team. Attracting outside board members relieves some of these barriers and can be expected to lead to superior firm performance. Building on human capital theory, and controlling for human capital in the top management team, we study how outside board human capital affects market and technical success of early stage high tech firms. Specifically, we focus on outside board tenure, diversity and specific experience as important determinants of outside board human capital. In order to test our hypotheses, we constructed a longitudinal panel dataset, consisting of 307 firm-year observation points in 50 early stage high tech firms located in Belgium. Our results show that board tenure is largely positively associated with both market and technical success, whereas board diversity positively affects market success but leads to decreased technical success. Outside board marketing experience was found to positively contribute to market success, whereas outside board R&D experience led to better technical performance. We discuss implications for academia and practice.