Resource deployment strategies following initial public offering: Connecting resource-based, upper echelons, and agency perspectives

This dissertation has posed two research questions: why do firms differ in resource deployment strategies and what are the performance outcomes of different resource deployment strategies? Using a longitudinal (1990--1998) data set of high-tech, entrepreneurial firms in the medical and surgical instruments industry, this dissertation provides five answers for the first research question. First, in support of resource-based theory, overall profitability of R&D investments increases with firm-specific experience possibly due to higher quality of investment choices and implementation. Second, in support of resource-based theory, the joint experience of managers in the top management team prepares them for making intense, irreversible investments towards building R&D capabilities. Third, R&D investment intensity goes down as the top management team becomes more heterogeneous in functional experience. Fourth, in support of agency theory, this dissertation finds that venture capitalist ownership and board membership lead to an increase in the intensity of R&D investments. Fifth, the positive moderating effect of institutional owners' board tenure on returns from marketing deployments suggests that as institutional owners become more knowledgeable about the firm, they can have a positive influence on the quality of marketing investment choices and implementation. Regarding the second research question, this dissertation provides three answers: First, in support of resource-based theory, among the surviving entrepreneurial firms, dedication of financial resources to building an innovative capability is rewarded with superior operational performance, market valuation and a higher rate of sales growth. Second, with the exception of the long-term sales generating power of past investments, firms cannot free ride on R&D deployments they incurred in the recent past. Third, adoption of an intense R&D or marketing deployment strategy leads to a decrease in operational performance. However, sustaining intense R&D deployments or intense marketing deployments for another year is sufficient to produce a positive effect on Tobin's q and operational performance respectively.