Firm-Specific Human Capital and Governance in IPO Firms: Addressing Agency and Resource Dependence Concerns

21 Pages Posted: 4 Jul 2009

See all articles by Jonathan D. Arthurs

Jonathan D. Arthurs

Washington State University

Lowell W. Busenitz

University of Oklahoma - Michael F. Price College of Business

Robert E. Hoskisson

Arizona State University (ASU) - Management Department

Richard A. Johnson

Arnold & Porter - Intellectual Property/Technology

Abstract

Entrepreneurs with firm-specific human capital represent both a potential source of competitive advantage and a threat to appropriate the rents that are ultimately generated by a new venture. This situation presents interesting agency and resource dependence challenges. While potential investors in these ventures will want assurances that their interests are protected, they will also want to ensure that these key entrepreneurs remain with the organization. Using agency theory and resource dependence theory, we examine the types of governance mechanisms that are implemented in firms going through an initial public offering comparing those ventures which indicate a dependence on these critical entrepreneurs versus those that do not. Our analysis reveals that ventures exhibiting dependence on key entrepreneurs are associated with higher insider and outsider ownership by the board, greater start-up experience by the board, greater use of contingent compensation, and greater use of involuntary departure agreements.

Suggested Citation

Arthurs, Jonathan D. and Busenitz, Lowell W. and Hoskisson, Robert E. and Johnson, Richard A., Firm-Specific Human Capital and Governance in IPO Firms: Addressing Agency and Resource Dependence Concerns. Entrepreneurship Theory and Practice, Vol. 33, Issue 4, pp. 845-865, July 2009. Available at SSRN: https://ssrn.com/abstract=1429085 or http://dx.doi.org/10.1111/j.1540-6520.2009.00329.x

Jonathan D. Arthurs (Contact Author)

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Lowell W. Busenitz

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

Robert E. Hoskisson

Arizona State University (ASU) - Management Department ( email )

Main Campus
PO Box 874006
Tempe, AZ 85287-4006
United States

Richard A. Johnson

Arnold & Porter - Intellectual Property/Technology ( email )

United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
740
PlumX Metrics