IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v42y2014i2p265-282.html
   My bibliography  Save this article

Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms

Author

Listed:
  • Massimo Colombo
  • Annalisa Croce

    ()

  • Samuele Murtinu

Abstract

We use the lens of the resource-based view and horizontal agency cost theory to analyse the effect of the presence of different types of individual owners, i.e., owner-managers and non-manager individual shareholders, on the performance of high-tech entrepreneurial firms. Ownership enlargement may contribute to fill the resource gap faced by entrepreneurial firms and improve firm performance. However, whereas owner-managers engender low horizontal agency costs, non-manager individual shareholders generate high horizontal agency problems because of their limited managerial involvement. Our results on a sample of Italian high-tech entrepreneurial firms show that the number of owner-managers has a positive effect on firm performance, whereas the effect of the number of non-manager individual shareholders is negligible. This latter effect becomes more positive, even though still not statistically significant, when firms are highly leveraged confirming the disciplining role of bank debt. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Massimo Colombo & Annalisa Croce & Samuele Murtinu, 2014. "Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms," Small Business Economics, Springer, vol. 42(2), pages 265-282, February.
    • Handle: RePEc:kap:sbusec:v:42:y:2014:i:2:p:265-282
    DOI: 10.1007/s11187-013-9483-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11187-013-9483-y
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "The Carnegie Conjecture: Some Empirical Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 413-435.
    2. Johan Wiklund & Dean Shepherd, 2003. "Aspiring for, and Achieving Growth: The Moderating Role of Resources and Opportunities," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 1919-1941, December.
    3. Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, vol. 43(3), pages 567-591, July.
    4. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    5. Villalonga, Belen & Amit, Raphael, 2006. "How do family ownership, control and management affect firm value?," Journal of Financial Economics, Elsevier, vol. 80(2), pages 385-417, May.
    6. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87 World Scientific Publishing Co. Pte. Ltd..
    7. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    8. Lerner, Joshua, 1998. ""Angel" financing and public policy: An overview," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 773-783, August.
    9. Gans, Joshua S. & Stern, Scott, 2003. "The product market and the market for "ideas": commercialization strategies for technology entrepreneurs," Research Policy, Elsevier, vol. 32(2), pages 333-350, February.
    10. repec:hrv:faseco:30728046 is not listed on IDEAS
    11. Jonathan T. Eckhardt & Scott Shane & Frédéric Delmar, 2006. "Multistage Selection and the Financing of New Ventures," Management Science, INFORMS, vol. 52(2), pages 220-232, February.
    12. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    13. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    14. Thomas J. Chemmanur & Karthik Krishnan & Debarshi K. Nandy, 2011. "How Does Venture Capital Financing Improve Efficiency in Private Firms? A Look Beneath the Surface," Review of Financial Studies, Society for Financial Studies, vol. 24(12), pages 4037-4090.
    15. Michael Faulkender & Mitchell A. Petersen, 2006. "Does the Source of Capital Affect Capital Structure?," Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 45-79.
    16. Thomas Dalziel & Robert E. White & Jonathan D. Arthurs, 2011. "Principal Costs in Initial Public Offerings," Journal of Management Studies, Wiley Blackwell, vol. 48, pages 1346-1364, September.
    17. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    18. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, February.
    19. Massimo G. Colombo & Luca Grilli, 2013. "The Creation of A Middle-Management Level by Entrepreneurial Ventures: Testing Economic Theories of Organizational Design," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 390-422, June.
    20. Harvey, Campbell R. & Lins, Karl V. & Roper, Andrew H., 2004. "The effect of capital structure when expected agency costs are extreme," Journal of Financial Economics, Elsevier, vol. 74(1), pages 3-30, October.
    21. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
    22. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    23. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, June.
    24. Brian L. Connelly & Robert E. Hoskisson & Laszlo Tihanyi & S. Trevis Certo, 2010. "Ownership as a Form of Corporate Governance," Journal of Management Studies, Wiley Blackwell, vol. 47(s2), pages 1561-1589, December.
    25. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    26. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    27. Igor Filatotchev & Mike Wright & Mufit Arberk, 2006. "Venture Capitalists, Syndication and Governance in Initial Public Offerings," Small Business Economics, Springer, vol. 26(4), pages 337-350, May.
    28. Becchetti, Leonardo & Trovato, Giovanni, 2002. "The Determinants of Growth for Small and Medium Sized Firms: The Role of the Availability of External Finance," Small Business Economics, Springer, vol. 19(4), pages 291-306, December.
    29. William S. Schulze & Michael H. Lubatkin & Richard N. Dino, 2002. "Altruism, agency, and the competitiveness of family firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 247-259.
    30. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    31. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    32. Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages 54-72, February.
    33. Brian Bushee, 2004. "Identifying and Attracting the "right" Investors: Evidence on the Behavior of Institutional Investors," Journal of Applied Corporate Finance, Morgan Stanley, vol. 16(4), pages 28-35.
    34. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    35. Robert E. Carpenter & Bruce C. Petersen, 2002. "Is The Growth Of Small Firms Constrained By Internal Finance?," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 298-309, May.
    36. Stark, Oded & Falk, Ita, 1998. "Transfers, Empathy Formation, and Reverse Transfers," American Economic Review, American Economic Association, vol. 88(2), pages 271-276, May.
    37. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
    38. Colombo, Massimo G. & Grilli, Luca, 2005. "Founders' human capital and the growth of new technology-based firms: A competence-based view," Research Policy, Elsevier, vol. 34(6), pages 795-816, August.
    39. Chandler, Gaylen N. & McKelvie, Alexander & Davidsson, Per, 2009. "Asset specificity and behavioral uncertainty as moderators of the sales growth -- Employment growth relationship in emerging ventures," Journal of Business Venturing, Elsevier, vol. 24(4), pages 373-387, July.
    40. Massimo Colombo & Luca Grilli, 2007. "Funding Gaps? Access To Bank Loans By High-Tech Start-Ups," Small Business Economics, Springer, vol. 29(1), pages 25-46, June.
    41. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal-Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    42. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    43. Nigel Driffield & Jun Du & Sourafel Girma, 2008. "Optimal geographic diversification and firm performance: evidence from the U.K," Journal of Productivity Analysis, Springer, vol. 30(2), pages 145-154, October.
    44. Johannes Van Biesebroeck, 2007. "ROBUSTNESS OF PRODUCTIVITY ESTIMATES -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 529-569, September.
    45. Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
    46. Autio, Erkko & Parhankangas, Annaleena, 1998. "Employment Generation Potential of New, Technology-Based Firms during a Recessionary Period: The Case of Finland," Small Business Economics, Springer, vol. 11(2), pages 113-123, September.
    47. Girma, Sourafel & Gorg, Holger & Strobl, Eric, 2007. "The effect of government grants on plant level productivity," Economics Letters, Elsevier, vol. 94(3), pages 439-444, March.
    48. He, Lerong, 2008. "Do founders matter? A study of executive compensation, governance structure and firm performance," Journal of Business Venturing, Elsevier, vol. 23(3), pages 257-279, May.
    49. Colombo, Massimo G. & Grilli, Luca & Murtinu, Samuele, 2011. "R&D subsidies and the performance of high-tech start-ups," Economics Letters, Elsevier, vol. 112(1), pages 97-99, July.
    50. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    51. Croce, Annalisa & Martí, José & Murtinu, Samuele, 2013. "The impact of venture capital on the productivity growth of European entrepreneurial firms: ‘Screening’ or ‘value added’ effect?," Journal of Business Venturing, Elsevier, vol. 28(4), pages 489-510.
    52. Storey, D. J. & Tether, B. S., 1998. "Public policy measures to support new technology-based firms in the European Union," Research Policy, Elsevier, vol. 26(9), pages 1037-1057, April.
    53. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    54. Damian Ward & Igor Filatotchev, 2010. "Principal-principal-agency relationships and the role of external governance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 249-261.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Farhad Shahveisi & Farshid Khairollahi & Mohammad Alipour, 2017. "Does ownership structure matter for corporate intellectual capital performance? An empirical test in the Iranian context," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 67-91, April.
    2. Cumming, Douglas J. & Grilli, Luca & Murtinu, Samuele, 2017. "Governmental and independent venture capital investments in Europe: A firm-level performance analysis," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 439-459.
    3. Murtinu, Samuele & Scalera, Vittoria G., 2016. "Sovereign Wealth Funds' Internationalization Strategies: The Use of Investment Vehicles," Journal of International Management, Elsevier, vol. 22(3), pages 249-264.
    4. Marc Cowling & Weixi Liu & Maria Minniti & Ning Zhang, 2016. "UK credit and discouragement during the GFC," Small Business Economics, Springer, vol. 47(4), pages 1049-1074, December.
    5. Felipe Rojas & Elena Huergo, 2016. "Characteristics of entrepreneurs and public support for NTBFs," Small Business Economics, Springer, vol. 47(2), pages 363-382, August.
    6. Samuele Murtinu, 2015. "Debt Maturity, Ownership Concentration, and Firm Efficiency," Economics Bulletin, AccessEcon, vol. 35(4), pages 2610-2616.
    7. Annalisa Croce & José Martí, 2017. "Financial constraints in family firms and the role of venture capital," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 119-144, March.
    8. Afzalur Rashid, 2016. "Managerial Ownership and Agency Cost: Evidence from Bangladesh," Journal of Business Ethics, Springer, vol. 137(3), pages 609-621, September.

    More about this item

    Keywords

    Horizontal agency costs; High-tech entrepreneurial firms; Productivity; Ownership structure; Bank debt; G32; L26; M13;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:42:y:2014:i:2:p:265-282. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.