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Board effects on performance in emerging industries: The case of biotechnology
Abstract
This study was designed to determine if the size and composition of the boards of directors is related to aftermarket performance of initial public offering firms (IPOs) in industries in the early stages of their life cycle. The importance of studying firm performance during the founding period has been emphasized in past research, but actual investigation has been rare. In addition, research on IPOs and the biotechnology industry (the focus of this study) in the literature of strategic management has been sparse. Based upon resource dependency theory, this study investigated factors associated with the size and composition of the board of directors at the time of the IPO and their effect on subsequent aftermarket performance. Specifically, this dissertation investigated the relationship between the effect of the size of the board, its expertise (e.g., finance and science), and the percentage of outside directors at the time of the IPO on the subsequent market valuation of these firms. The study examined 80 public biotech companies from the years 1980-1987. The results of the study supported resource dependency theory by finding significant relationships between the size and composition of the board and aftermarket IPO performance of the biotech firms. Specifically, biotech firms which had a larger number of outside directors with financially related backgrounds had significantly better aftermarket IPO performance. Also, firms which had a larger percentage of outside directors had significantly better aftermarket IPO performance. Results also showed a negative significant relationship between the size of the board and aftermarket IPO performance. In addition, no significant relationships were found between aftermarket IPO performance and (1) the number of outside directors who were university scientists, and (2) the interaction between the number of outside directors with financially related backgrounds and outsiders who were university scientists. Finally, positive significant relationships were found between organizational size and initial offering size with aftermarket IPO performance.
Subject Area
Management|Biology|Finance
Recommended Citation
Finkle, Todd Alan, "Board effects on performance in emerging industries: The case of biotechnology" (1993). ETD collection for University of Nebraska-Lincoln. AAI9322794.
https://digitalcommons.unl.edu/dissertations/AAI9322794