Financing decisions as a source of conflict in venture boards

  • Forbes D
  • Korsgaard M
  • Sapienza H
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Abstract

Governance scholarship has suggested that venture boards should be structured so as to stimulate internal conflict. However, structure is a weak predictor of board effectiveness. Moreover, conflict can be dysfunctional, especially when it is focused on relationships rather than tasks. We show that venture boards experience more relationship conflict when they make financing decisions that involve devaluation of the venture and that this effect is moderated by whether the CEO is a founder. Our findings should prompt venture governance scholars to reconsider the importance of board structure, the value of board conflict and the behavior of founder- versus non-founder CEOs. © 2009 Elsevier Inc.

Author-supplied keywords

  • Boards of directors
  • Conflict
  • Decision making
  • Founders

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Authors

  • Daniel P. Forbes

  • M. Audrey Korsgaard

  • Harry J. Sapienza

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