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The effect of board human capital on the performance of technical alliance investments

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R and D Management

Published online on

Abstract

Despite boards of directors’ prominent involvement in strategic alliance (SA) decisions in practice and reports from news media, there is relatively little academic research exploring the board's value for a firm's technical SA investments involving a technical transfer or R&D, which are characterized by a high level of uncertainty, information asymmetry, and extreme complexity. Anchored in the resource dependence theory, this study aims to address this important issue by examining how board of directors contribute their human capital, in the form of relevant strategic experience, may mitigate the core challenges managers face when pursuing technical SAs and thereby influencing their outcomes. Our empirical results show that when outside directors hold more extensive alliance experience, they can better execute their consulting function and improve the firm's technical alliance performance. In addition, directors with experience specifically related to technical alliances also have a positive effect on performance. Last, we find that the impact of alliance experience on technical alliance performance is positively moderated by the size of directors’ prior affiliated companies and their share ownership in the focal firm.