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Ownership Structure, Horizontal Agency Costs and the Performance of High-Tech Entrepreneurial Firms

34 Pages Posted: 22 Oct 2010 Last revised: 2 Feb 2014

Massimo G. Colombo

Politecnico di Milano

Annalisa Croce

Polytechnic University of Milan - Dipartimento di Economia e Produzione

Samuele Murtinu

University of Groningen

Date Written: March 18, 2013

Abstract

We use the lens of the resource-based view and horizontal agency cost theory to analyse the effect of the presence of different types of individual owners, i.e. owner-managers and non-manager individual shareholders, on the performance of high-tech entrepreneurial firms. Ownership enlargement may contribute to fill the resource gap faced by entrepreneurial firms and improve firm performance. However, whereas owner-managers engender low horizontal agency costs, non-manager individual shareholders generate high horizontal agency problems due to their limited managerial involvement. Our results on a sample of Italian high-tech entrepreneurial firms show that the number of owner-managers has a positive effect on firm performance, whereas the effect of the number of non-manager individual shareholders is negligible. This latter effect becomes more positive, even though still not statistically significant, when firms are highly leveraged, confirming the disciplining role of bank debt.

Keywords: horizontal agency costs, high-tech entrepreneurial firms, productivity, ownership structure, bank debt

JEL Classification: G32, L26, M13

Suggested Citation

Colombo, Massimo G. and Croce, Annalisa and Murtinu, Samuele, Ownership Structure, Horizontal Agency Costs and the Performance of High-Tech Entrepreneurial Firms (March 18, 2013). Small Business Economics 42(2), 265-282. Available at SSRN: https://ssrn.com/abstract=1695125 or http://dx.doi.org/10.2139/ssrn.1695125

Massimo G. Colombo

Politecnico di Milano ( email )

Piazza Leonardo da Vinci, 32
20113 Milan
Italy

Annalisa Croce

Polytechnic University of Milan - Dipartimento di Economia e Produzione ( email )

Piazza Leonardo da Vinci, 32
Milan, 20133
Italy

Samuele Murtinu (Contact Author)

University of Groningen ( email )

Postbus 72
9700 AB Groningen
Netherlands

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