Corporate Governance and the Supply of Commercial Human Capital

As was discussed in Chapter 1, venture capital firms do not only supply capital to startup firms and companies that are in the development phase; they also actively participate in the governance of the firms in which they have invested. Some venture capital investors, such as major institutional investors (pension funds, etc.) at times delegate this work to smaller and more targeted venture capital funds specializing in, for example, life science investment. In their day-to-day work, venture capital investors either work through the board of directors, holding one or more seats in the firm’s board, or through participating in the recruitment of CEOs and other top management executives who are regarded as being critical for the commercialisation of the innovation. Speaking in theoretical terms, all issues pertaining to the management and control of firms and the how the interest of various stakeholders is balanced are labelled corporate governance. Corporate governance is addressed in a quite extensive literature — including corporate law literature, economic theory, and management studies — and includes a variety of perspectives and views, including more formal theoretical statements and historical studies of how corporate governance practices have developed over time and how such practices in many cases are the outgrowth of political ambitions to balance various social interests and to anticipate and handle risks. In this chapter, this literature, during the last few decades dominated by an agency theory perspective — “agency theory has colored the air we breathe,” Dobbin and Jung claim (2010: 32) — will be reviewed and critically examined.