IDEAS home Printed from https://ideas.repec.org/p/hhs/cesisp/0468.html
   My bibliography  Save this paper

Outside Board Directors and Start-Up Firms’ Innovation

Author

Listed:
  • Baum, Christopher F

    (Boston College and DIW Berlin)

  • Lööf, Hans

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Stephan, Andreas

    (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))

  • Viklund-Ros, Ingrid

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

We exploit increased access to detailed employer-employee data to assess whether outside board members affect innovation performance among start-up firms. Using data for all new limited companies in Sweden born during 1999–2013 which have no more then 10 employees when formed, we provide structural equation estimates that deal with the endogenous selection of board directors. Our empirical findings show that an increase in the board’s expertise, measured by the relative productivity of the firms where outsiders are employed, has a significant and positive impact on the new firm’s propensity to apply for both patents and trademarks.

Suggested Citation

  • Baum, Christopher F & Lööf, Hans & Stephan, Andreas & Viklund-Ros, Ingrid, 2018. "Outside Board Directors and Start-Up Firms’ Innovation," Working Paper Series in Economics and Institutions of Innovation 468, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0468
    as

    Download full text from publisher

    File URL: https://static.sys.kth.se/itm/wp/cesis/cesiswp468.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gaétan Rassenfosse, 2012. "How SMEs exploit their intellectual property assets: evidence from survey data," Small Business Economics, Springer, vol. 39(2), pages 437-452, September.
    2. Block, Jörn H. & Fisch, Christian O. & Hahn, Alexander & Sandner, Philipp G., 2015. "Why do SMEs file trademarks? Insights from firms in innovative industries," Research Policy, Elsevier, vol. 44(10), pages 1915-1930.
    3. Alessandra Colombelli & Jackie Krafft & Marco Vivarelli, 2016. "To be born is not enough: the key role of innovative start-ups," Small Business Economics, Springer, vol. 47(2), pages 277-291, August.
    4. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
    5. Andersson Joona, Pernilla & Wadensjö, Eskil, 2006. "Do the Unemployed Become Successful Entrepreneurs? A Comparison between the Unemployed, Inactive and Wage-Earners," IZA Discussion Papers 2402, Institute of Labor Economics (IZA).
    6. Balsmeier, Benjamin & Fleming, Lee & Manso, Gustavo, 2017. "Independent boards and innovation," Journal of Financial Economics, Elsevier, vol. 123(3), pages 536-557.
    7. Alessandro Arrighetti & Marco Vivarelli, 1999. "The Role of Innovation in the Postentry Performance of New Small Firms: Evidence from Italy," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 927-939, April.
    8. Eliezer M. Fich, 2005. "Are Some Outside Directors Better than Others? Evidence from Director Appointments by Fortune 1000 Firms," The Journal of Business, University of Chicago Press, vol. 78(5), pages 1943-1972, September.
    9. Martin Andersson & Steven Klepper, 2013. "Characteristics and performance of new firms and spinoffs in Sweden," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 245-280, February.
    10. M. Andrew Fields & Phyllis Y. Keys, 2003. "The Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear Risk," The Financial Review, Eastern Finance Association, vol. 38(1), pages 1-24, February.
    11. Mark L. Defond & Rebecca N. Hann & Xuesong Hu, 2005. "Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?," Journal of Accounting Research, Wiley Blackwell, vol. 43(2), pages 153-193, May.
    12. Thomas Dalziel & Richard J. Gentry & Michael Bowerman, 2011. "An Integrated Agency–Resource Dependence View of the Influence of Directors' Human and Relational Capital on Firms' R&D Spending," Journal of Management Studies, Wiley Blackwell, vol. 48, pages 1217-1242, September.
    13. Blind, Knut & Edler, Jakob & Frietsch, Rainer & Schmoch, Ulrich, 2006. "Motives to patent: Empirical evidence from Germany," Research Policy, Elsevier, vol. 35(5), pages 655-672, June.
    14. Duchin, Ran & Matsusaka, John G. & Ozbas, Oguzhan, 2010. "When are outside directors effective?," Journal of Financial Economics, Elsevier, vol. 96(2), pages 195-214, May.
    15. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    16. Vivarelli, Marco & Audretsch, David, 1998. "The Link between the Entry Decision and Post-Entry Performance: Evidence from Italy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 7(3), pages 485-500, September.
    17. Udo Brixy & Reinhold Grotz, 2007. "Regional patterns and determinants of birth and survival of new firms in Western Germany," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 19(4), pages 293-312, July.
    18. Howitt, Peter & Aghion, Philippe, 1998. "Capital Accumulation and Innovation as Complementary Factors in Long-Run Growth," Journal of Economic Growth, Springer, vol. 3(2), pages 111-130, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. F Baum, Christopher & Lööf, Hans & Stephan, Andreas & Viklund-Ros, Ingrid, 2019. "Innovation by start-up firms: The influence of the board of directors," Working Paper Series in Economics and Institutions of Innovation 483, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies, revised 16 Aug 2020.
    2. Christopher F. Baum & Hans Lööf & Andreas Stephan & Ingrid Viklund-Ros, 2019. "Innovation by start-up firms: The influence of the board of directors for knowledge spillovers," Boston College Working Papers in Economics 988, Boston College Department of Economics, revised 31 Aug 2021.
    3. Lauren Cohen & Andrea Frazzini & Christopher J. Malloy, 2012. "Hiring Cheerleaders: Board Appointments of "Independent" Directors," Management Science, INFORMS, vol. 58(6), pages 1039-1058, June.
    4. Hans Lööf & Pardis Nabavi, 2014. "Survival, productivity and growth of new ventures across locations," Small Business Economics, Springer, vol. 43(2), pages 477-491, August.
    5. Meng, Yijun & Clements, Michael P. & Padgett, Carol, 2018. "Independent directors, information costs and foreign ownership in Chinese companies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 139-157.
    6. Kim, Kyonghee & Mauldin, Elaine & Patro, Sukesh, 2014. "Outside directors and board advising and monitoring performance," Journal of Accounting and Economics, Elsevier, vol. 57(2), pages 110-131.
    7. Duchin, Ran & Matsusaka, John G. & Ozbas, Oguzhan, 2010. "When are outside directors effective?," Journal of Financial Economics, Elsevier, vol. 96(2), pages 195-214, May.
    8. Baum, Christopher F. & Lööf, Hans & Stephan, Andreas & Viklund-Ros, Ingrid, 2022. "Innovation by start-up firms: The role of the board of directors for knowledge spillovers," Research Policy, Elsevier, vol. 51(1).
    9. Sandra Cavaco & Patricia Crifo & Antoine Rebérioux & Gwenael Roudaut, 2014. "Independent directors: less informed, but better selected? New evidence from a two-way director-firm fixed effect model," Working Papers hal-04141284, HAL.
    10. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    11. Stephen Gray & John Nowland, 2013. "Is prior director experience valuable?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(3), pages 643-666, September.
    12. Brian Bolton & Jing Zhao, 2022. "Busy Boards, Entrenched Directors and Corporate Innovation," IJFS, MDPI, vol. 10(4), pages 1-34, September.
    13. Etienne Redor, 2016. "Board attributes and shareholder wealth in mergers and acquisitions: a survey of the literature," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(4), pages 789-821, December.
    14. Bill Francis & Iftekhar Hasan & Qiang Wu, 2015. "Professors in the Boardroom and Their Impact on Corporate Governance and Firm Performance," Financial Management, Financial Management Association International, vol. 44(3), pages 547-581, September.
    15. Sihai Li & Yi Quan & Gary Gang Tian & Kun Tracy Wang & Stella Huiying Wu, 2022. "Academy fellow independent directors and innovation," Asia Pacific Journal of Management, Springer, vol. 39(1), pages 103-148, March.
    16. Nguyen, Bang Dang & Nielsen, Kasper Meisner, 2010. "The value of independent directors: Evidence from sudden deaths," Journal of Financial Economics, Elsevier, vol. 98(3), pages 550-567, December.
    17. Hans Lööf & Ingrid Viklund‐Ros, 2020. "Board of directors and export spillovers: What is the impact on extensive margins of trade?," The World Economy, Wiley Blackwell, vol. 43(5), pages 1188-1215, May.
    18. Dong Chen, 2014. "The Non-monotonic Effect of Board Independence on Credit Ratings," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(2), pages 145-171, April.
    19. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    20. Chen, Jun & Garel, Alexandre & Tourani-Rad, Alireza, 2019. "The value of academics: Evidence from academic independent director resignations in China," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 393-414.

    More about this item

    Keywords

    Start-ups; outside directors; innovation; patents; trademarks; productivity; endogeneity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:cesisp:0468. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vardan Hovsepyan (email available below). General contact details of provider: https://edirc.repec.org/data/cekthse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.