Outside directors' industry‐specific experience and firms' liability of newness

Abstract

AbstractThis study makes a contribution to the growing literature on the board's resource provision role by examining a specific type of resource provision (i.e., industry experience supplementing) and demonstrating the criticality of the liabilities of newness to this particular role. In this study, we find that among younger entrepreneurial firms, a dearth of top management industry experience is offset by the presence of outside directors with significant managerial industry experience, providing evidence of experience supplementing by outside directors. Our study highlights that the notion of experience supplementing at the upper echelons prevails in young firms as they try to alleviate the burdens of the liability of newness. Experience supplementing underscores board‐management collaboration during early years of firm development. Copyright © 2008 John Wiley & Sons, Ltd.