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Agency theory predicts that incentives will align agents' interests with those of principals. However, the resource‐based view suggests that to be effective, the incentive to deliver must be paired with the ability to deliver. Using F ortune 500 boards as an empirical context, this study shows that the presence of directors who lack top‐level experience but own large shareholdings is negatively associated with firm value, an effect that increases in the number of such directors. Firm value rises after such directors depart from boards, with the greatest increases occurring when many of these directors leave. While agency theory highlights the importance of the right incentives being in place, this research suggests that this can be ineffective if the right resources are not also in place . Copyright © 2013 John Wiley & Sons, Ltd.
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