Venture Boards: Distinctive Monitoring and Implications for Firm Performance

Abstract

Several unique characteristics of ventures distinguish them from public firms and lead to distinctive monitoring issues. In this article I develop a theoretical framework that links the attributes of the venture and the board composition with venture board monitoring and its implications for firm performance. Contributing to the strategy literature on corporate governance, the framework offers counterintuitive deviations from how agency theory is typically conceptualized, highlights that an unexpected “principal problem” could emerge as the separation of ownership and control is reduced, and presents novel insights about the interdependence between agency theory and resource dependence theory. This framework also adds to the research on entrepreneurial firms by complementing the extant emphasis in the literature on resource provisioning and by offering a richer view of key actors through opening the black box of strategic action in ventures. More broadly, by focusing on an underexamined but important context beyond public firms, this article highlights rich opportunities for developing a contingency theory of corporate governance.