Outside directors' experience, TMT firm-specific human capital, and firm performance in entrepreneurial IPO firms

a r t i c l e i n f o Drawing on the behavioral agency perspective and entrepreneurship literature, we examine the impact of board configuration at the time of an IPO on top management team (TMT) firm-specific human capital, and firm performance in young IPO firms. The results show that the ratio of outside directors at the time of an IPO has a positive relationship with the attrition of TMT firm-specific human capital in the first two years following the IPO. Outside directors' industry-and firm-specific experiences negatively moderate this relationship. Finally, our study provides evidence that TMT firm-specific human capital attrition negatively affects subsequent firm performance. Transition to the public domain often requires IPO firms to recon-figure their boards of directors. Although scholars and practitioners are concerned with how to structure boards to reduce agency problems and achieve short-term IPO performance (Certo, Holmes, & Holcomb, 2007), focusing excessively on such concerns may adversely affect long-studies have directly examined the impact of boards of directors on TMT human capital in the IPO context. Underwriters' and new blockholders' interests play an important Prestigious underwriters and powerful outside investors often reduce ownership and board seats for TMT members on, but high ratios of outsiders may adversely affect the retention of TMT firm-specific human capital, which is referred to as the knowledge, skills, and experience executives acquire during the course of working in their firms. According to the behavioral agency model, TMT members make decisions toward lowering their risk bearing, or the " perceived risk to agent wealth that can result from employment risk or other threats to agent wealth " (Wiseman & Gomez-Mejia, 1998: 136). A higher ratio of outsiders means less TMT board participation and control of the firm's direction, thus increasing TMT risk bearing. Managers may be less committed to developing firm-specific human capital in the present firm, and may look for new jobs elsewhere (Becker, 1964). Entrepreneurs and executives in young firms value discretion and freedom in decision making, and have strong psycho-Greater board control by outsiders may reduce TMT members' discretion, potentially increasing their exit following the IPO. We argue that higher ratios of outsiders negatively affect TMT firm-specific human capital, and that the extent of this influence on TMT risk bearing and discretion may depend on outside directors' experience bases. We also examine the impact of the attrition of TMT firm-specific human capital on subsequent IPO …