Venture Capital Ownership as a Contingent Resource: How Owner/Firm Fit Influences IPO Outcomes

Abstract

This study seeks to contribute to the literature on corporate ownership and firm performance by advancing an expertise-based perspective that views owners as a contingent resource. Specifically, we propose that heterogeneous prior experiences of corporate owners creates identifiable differences in owner expertise, and that these differences in expertise, when matched appropriately and dynamically to firms’ specific strategic needs, will be a source of value over the life cycle of a firm. We draw from the venture capital (VC) context to identify ex ante the meaningful differences in owner expertise, as well as the firm-specific situations for which we believe a dynamic fit/misfit would exist between VC owners and these private firms. We test and find support for our predictions regarding the performance benefits of dynamically well-matched owners and firms using an extensive longitudinal dataset of the population of U.S. private firms seeking to go public from 1997 to 2004 and their VC owners. We discuss the implications of our approach as they relate to future research opportunities across the corporate governance, strategy, and entrepreneurship literatures.

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