Director's entrepreneurial experience and firm's acquisition of new ventures

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School of Business | Master's thesis
Ask about the availability of the thesis by sending email to the Aalto University Learning Centre oppimiskeskus@aalto.fi
Date
2013
Major/Subject
MSc Degree Programme in Strategy
MSc Degree Programme in Strategy
Mcode
Degree programme
Language
en
Pages
74
Series
Abstract
Director's previous experience and its influence on corporate strategy have started to generate academic attention in the recent years. However, there is still limited theoretical development in the field, for example to identify the experience and the mechanism behind the influence on corporate strategy. There are even fewer studies that empirically examined the relationship. In order to fulfill the research gap, this thesis focuses on the entrepreneurial experience from the directors and studies its influence on company's strategic decision in the context of external venturing. The thesis examines how director's previous entrepreneurial experience relates to company's propensity to acquire a new venture. In the theoretical part, the study developed a framework to explain the mechanism behind the influence from director's entrepreneurial experience on the corporate external venturing decisions. Previous experience will enhance the relevant human capital, relational capital, and positive bias towards the acquisition of new ventures in the director level. Then, the individual effects are aggregated in the board level, which in turn will influence company's strategic decision in the external venturing through board's monitoring and advising roles. In the empirical part, the study constructed a quantitative model to examine the effect of director's entrepreneurial experience on company's propensity to acquire entrepreneurial firms. The entrepreneurial experience was proxied by venture capital experience. The sample included the largest public ICT companies from US in 1997. The observation year is from 2001 to 2006. Transaction data were from Zephyr database and director experience data were manually collected from company's proxy statements. The empirical results showed that director's entrepreneurial experience is positively associated with company's propensity to acquire entrepreneurial firms. Equally important, it has been found that director's previous entrepreneurial experience is constantly related to company's propensity to target a new venture in the acquisition and minority investment decisions, but not with company's propensity to the acquisition.
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Keywords
entrepreneurial experience, board, corporate strategy, venture capital, acquisition
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