SUMMARY 

FACTORS AFFECTING PROCEDURAL JUSTICE AND THE USE OF KNOWLEDGE ON VENTURE BOARDS 

Daniel P. Forbes, University of Minnesota, Carlson School of Management
Harry J. Sapienza, University of Minnesota, Carlson School of Management
M. Audrey Korsgaard, University of South Carolina, Moore School of Business 

Principal Topic 

Thanks to the work of Bruton, Fried, Hisrich, Huse, Rosenstein and others, the literature on new venture boards goes beyond the literature on large firms boards in key respects. Specifically, it reveals a greater appreciation of the importance of board processes and offers at least some preliminary insight into the processes themselves. This insight underscores the need for further research that sheds additional light on board processes, especially those that enable venture boards to better execute their advisory role. In this study we identify two board processes that can enhance the strategic decision making of venture boards and ask: Under what conditions are such boards more likely to exhibit these processes? 

In the context of group decision making, procedural justice theory argues that various group outcomes are influenced by the way the decision making process itself is controlled and by groupmembers’ perceptions of the fairness of that process. Transactive memory theory argues that various group outcomes are influenced by the way knowledge is shared and exchanged within groups. Sapienza, Korsgaard, Goulet and Hoogendam (2000) argued that procedural justice can improve the strategic decisions of venture boards, and past work highlighting the importance of directors’ knowledge in high-technology firms (e.g., Forbes & Milliken, 1999) suggests that venture boards that exchange and coordinate their knowledge well will be better positioned to fulfill their functions. We develop and test a model of the influence of various contextual and board-level characteristics on these board processes. 

Method 

The model will be tested using a combination of archival and survey data. Data will be obtained for a sample of U.S.-based firms that have recently received venture capital backing. The sample will be selected from the VentureXpert database, which will provide archival measures of the independent variables. The first stage of a multi-stage survey of these firms will measure the dependent variables. 

Results and Implications 

From a theoretical standpoint, our research will extend the literature on venture board processes by applying some recognized theories from the group decision making literature. From a practical standpoint, our findings will help to clarify the causes of board processes in ways that will be of interest to managers, boardmembers, investors and consultants. 

CONTACT: Daniel Forbes, U. of Minnesota, Carlson School of Management, Suite 3-365, Minneapolis, MN 55455; (T) 612-625-2989; (F) 612-626-1316; dforbes@csom.umn.edu 

© 2004 Babson College. All rights reserved. Last updated May 2004.