Pre-Market Entry Experience and Post-Market Entry Learning of the Board of Directors: Implications for Post-Entry Performance

Pao Lien Chen, Yasemin Kor, Joseph T. Mahoney, Danchi Tan

Research output: Contribution to journalArticle

Abstract

Research summary: We investigate how board directors’ expertise influences post-entry performance of start-ups and diversifying entrants in an emerging market. Empirical analysis based on firms in the U.S. wireless communications service industry from 1983 to 1998 reveals that post-entry growth increases with directors’ post-entry firm-specific board experience, but decreases with directors’ inherited pre-entry firm-specific board experience. In addition, outside directors’ intra-industry managerial experience stimulates post-entry growth while intra-industry directorial experience reduces it. We also find that firms benefit from having true industry outsiders who are experienced in other—not the focal—industries. Taking this evidence together, boards with a mix of directors with post-entry firm-specific board expertise and complementary other industry expertise are most suitable for the governance of post-entry venture growth. Managerial summary: Careful board composition design can facilitate post-entry performance of new entrants into an emerging industry. Specifically, entrants should retain some of the initial recruits to the board in order to steadily build firm-specific board expertise. They should also introduce genuine industry outsiders (with no experience in the focal industry) to the board in order to inject fresh thinking into board governance, which is critical for renewal of the firm's growth strategy and market positioning over time. For diversifying entrants, if the new market entry is a strategic investment for the parent firm, it is worth setting up a separate board of directors where directors are not linked with the parent firm board, as a preexisting board is likely to be too deeply engaged with existing businesses.

Original languageEnglish (US)
Pages (from-to)441-463
Number of pages23
JournalStrategic Entrepreneurship Journal
Volume11
Issue number4
DOIs
StatePublished - Dec 2017

Fingerprint

Market entry
Board of directors
Industry
Expertise
Firm entry
Governance
Outsider
Positioning
Strategic investment
Wireless communication
Service industries
New entrants
Venture
Renewal
Build-to-order
Start-ups
Board composition
Firm growth
Outside directors
Empirical analysis

Keywords

  • board of directors
  • experience
  • learning-by-doing and learning from others
  • market entry
  • post-entry performance
  • start-ups and diversifying entrants

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Strategy and Management

Cite this

Pre-Market Entry Experience and Post-Market Entry Learning of the Board of Directors : Implications for Post-Entry Performance. / Chen, Pao Lien; Kor, Yasemin; Mahoney, Joseph T.; Tan, Danchi.

In: Strategic Entrepreneurship Journal, Vol. 11, No. 4, 12.2017, p. 441-463.

Research output: Contribution to journalArticle

@article{9c47f60a37994667a9afea178738f3d2,
title = "Pre-Market Entry Experience and Post-Market Entry Learning of the Board of Directors: Implications for Post-Entry Performance",
abstract = "Research summary: We investigate how board directors’ expertise influences post-entry performance of start-ups and diversifying entrants in an emerging market. Empirical analysis based on firms in the U.S. wireless communications service industry from 1983 to 1998 reveals that post-entry growth increases with directors’ post-entry firm-specific board experience, but decreases with directors’ inherited pre-entry firm-specific board experience. In addition, outside directors’ intra-industry managerial experience stimulates post-entry growth while intra-industry directorial experience reduces it. We also find that firms benefit from having true industry outsiders who are experienced in other—not the focal—industries. Taking this evidence together, boards with a mix of directors with post-entry firm-specific board expertise and complementary other industry expertise are most suitable for the governance of post-entry venture growth. Managerial summary: Careful board composition design can facilitate post-entry performance of new entrants into an emerging industry. Specifically, entrants should retain some of the initial recruits to the board in order to steadily build firm-specific board expertise. They should also introduce genuine industry outsiders (with no experience in the focal industry) to the board in order to inject fresh thinking into board governance, which is critical for renewal of the firm's growth strategy and market positioning over time. For diversifying entrants, if the new market entry is a strategic investment for the parent firm, it is worth setting up a separate board of directors where directors are not linked with the parent firm board, as a preexisting board is likely to be too deeply engaged with existing businesses.",
keywords = "board of directors, experience, learning-by-doing and learning from others, market entry, post-entry performance, start-ups and diversifying entrants",
author = "Chen, {Pao Lien} and Yasemin Kor and Mahoney, {Joseph T.} and Danchi Tan",
year = "2017",
month = "12",
doi = "10.1002/sej.1251",
language = "English (US)",
volume = "11",
pages = "441--463",
journal = "Strategic Entrepreneurship Journal",
issn = "1932-4391",
publisher = "John Wiley and Sons Inc.",
number = "4",

}

TY - JOUR

T1 - Pre-Market Entry Experience and Post-Market Entry Learning of the Board of Directors

T2 - Implications for Post-Entry Performance

AU - Chen, Pao Lien

AU - Kor, Yasemin

AU - Mahoney, Joseph T.

AU - Tan, Danchi

PY - 2017/12

Y1 - 2017/12

N2 - Research summary: We investigate how board directors’ expertise influences post-entry performance of start-ups and diversifying entrants in an emerging market. Empirical analysis based on firms in the U.S. wireless communications service industry from 1983 to 1998 reveals that post-entry growth increases with directors’ post-entry firm-specific board experience, but decreases with directors’ inherited pre-entry firm-specific board experience. In addition, outside directors’ intra-industry managerial experience stimulates post-entry growth while intra-industry directorial experience reduces it. We also find that firms benefit from having true industry outsiders who are experienced in other—not the focal—industries. Taking this evidence together, boards with a mix of directors with post-entry firm-specific board expertise and complementary other industry expertise are most suitable for the governance of post-entry venture growth. Managerial summary: Careful board composition design can facilitate post-entry performance of new entrants into an emerging industry. Specifically, entrants should retain some of the initial recruits to the board in order to steadily build firm-specific board expertise. They should also introduce genuine industry outsiders (with no experience in the focal industry) to the board in order to inject fresh thinking into board governance, which is critical for renewal of the firm's growth strategy and market positioning over time. For diversifying entrants, if the new market entry is a strategic investment for the parent firm, it is worth setting up a separate board of directors where directors are not linked with the parent firm board, as a preexisting board is likely to be too deeply engaged with existing businesses.

AB - Research summary: We investigate how board directors’ expertise influences post-entry performance of start-ups and diversifying entrants in an emerging market. Empirical analysis based on firms in the U.S. wireless communications service industry from 1983 to 1998 reveals that post-entry growth increases with directors’ post-entry firm-specific board experience, but decreases with directors’ inherited pre-entry firm-specific board experience. In addition, outside directors’ intra-industry managerial experience stimulates post-entry growth while intra-industry directorial experience reduces it. We also find that firms benefit from having true industry outsiders who are experienced in other—not the focal—industries. Taking this evidence together, boards with a mix of directors with post-entry firm-specific board expertise and complementary other industry expertise are most suitable for the governance of post-entry venture growth. Managerial summary: Careful board composition design can facilitate post-entry performance of new entrants into an emerging industry. Specifically, entrants should retain some of the initial recruits to the board in order to steadily build firm-specific board expertise. They should also introduce genuine industry outsiders (with no experience in the focal industry) to the board in order to inject fresh thinking into board governance, which is critical for renewal of the firm's growth strategy and market positioning over time. For diversifying entrants, if the new market entry is a strategic investment for the parent firm, it is worth setting up a separate board of directors where directors are not linked with the parent firm board, as a preexisting board is likely to be too deeply engaged with existing businesses.

KW - board of directors

KW - experience

KW - learning-by-doing and learning from others

KW - market entry

KW - post-entry performance

KW - start-ups and diversifying entrants

UR - http://www.scopus.com/inward/record.url?scp=85018959878&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85018959878&partnerID=8YFLogxK

U2 - 10.1002/sej.1251

DO - 10.1002/sej.1251

M3 - Article

AN - SCOPUS:85018959878

VL - 11

SP - 441

EP - 463

JO - Strategic Entrepreneurship Journal

JF - Strategic Entrepreneurship Journal

SN - 1932-4391

IS - 4

ER -