Chapter 2

This chapter contains a review of the relevant literature that has informed the study. It reiterates and further details the calls to set aside the agency perspective to leave room for more corporate governance studies of the behavioural, multi-theoretic type, particularly those studies investigating boards (eg, Eisenhardt (1989), Pye and Pettigrew (2005), Roberts, McNulty and Stiles (2005)), and to treat boards as groups (Petrovic, 2008). It goes on to survey previous work done in the area of behavioural approaches to board effectiveness in general and on startup boards in particular.

The literature review then examines extent research on what corporate and startup board roles and tasks are, and on the individual roles themselves. It goes on to consider whether viewing boards as groups or teams is justified by the literature, and research on the group processes of conflict and power. Works on power lead into a review of the works dealing with discourse in an organizational context, and through to an evaluation of studies of entrepreneurial discourse.

The next section of the review examines the way that team effectiveness has been dealt with in previous literature, and how this has affected thinking on board effectiveness. This section also introduces Forbes & Milliken’s (1999) influential paper, which collapses the multitude of criteria for

9 understanding board effectiveness into two: cohesiveness and task performance. Literature on these two areas is then surveyed, along with works dealing with the effects of conflict and power on both.

The final sections of the literature review explore literature in the area of early stage ventures and their characteristics, and the actors pertinent to this thesis on their boards; that is, entrepreneurs and Angel investors. The findings for Angels and venture capitalists are discussed, and the information gaps for the former noted.

1.3.2 Chapter 3

Chapter 3 seeks to contextualize the study by situating the particular context of the entrepreneurial founders and Angel investors sitting as directors on the board of an Australian startup company in its broader socio-economic, political and discursive settings. There is currently a keen interest in ‘technologically disruptive’ startups, and they way that they have and are changing daily life (for example location-aware food delivery services and on-demand streaming entertainment) and the way that commerce is conducted. Entrepreneurs are treated as celebrities in the business world, and successful entrepreneurs as celebrities in the wider community.

However, despite the interest in becoming an entrepreneur, or in technological innovations, startups are often not noticed by the public radar until they either become successful (e.g. Amazon), made a very successful transition to being a public company (e.g. Atlassian), or have been purchased by one of the technology giants such as Google or Microsoft because of a technological innovation or market entrée they offer. Many more are and remain invisible to the general public, and the private investors in them are even less visible and understood except to those working in the startup ecosystem.

The early sections of this chapter provide background on early stage companies in Australia, their economic importance, and on Angel investors in them. The next sections deal with the political, social and regulatory context in which startups and investors are embedded, and a brief background on startup boards in Australia. The later sections of Chapter 3 seek to highlight the importance of

10 entrepreneurial discourse in Australia. This discourse informs the thinking of the general public as well as directors about founders and entrepreneurial companies.

Entrepreneurial discourse is explored at the various levels of the social realm, with examples provided to illustrate these. The discourse of Angel investors is also introduced, and an explanation provided as to the way this discourse and entrepreneurial discourse overlap and then diverge. A model argument is also provided which seeks to further unpack these discourses.

The final section of Chapter 3 argues for the practical relevance of research studying the interactions on Angels and founders on startup boards, given the importance of startups to the economy, and the importance of both founders and investors to fund and drive early stage companies to success.

1.3.3 Chapter 4

This chapter introduces the conceptual framework employed in this thesis. Broadly speaking there are two parts to the conceptual model. The first part has extended the Forbes and Milliken (1999) Board Effectiveness Framework by the addition of process and relationship conflict processes to the existing influencers (task conflict, effort norms, and knowledge and skills) on the components of board effectiveness; cohesiveness and task performance. This extended model also aimed to account for the influence of power dynamics on these components. These frameworks are displayed in diagrammatic form in the chapter at Figure 14 (base model) and Figure 17 (Extended Model of Board Effectiveness). In addition, the Board Power Framework developed by Pettigrew and McNulty (1998) has been used to provide an initial basis for the understanding power on boards, with the addition of power sources derived from other research by Peebles (2010) and Purdy (2012).

The second part of the conceptual framework employed in this thesis provides an alternate view of power constructs. A critical approach is not simply the employment of a particular method of analysis (in this thesis, critical discourse analysis), but requires a shift in epistemological viewpoint. As the

11 board of an early stage venture is the meeting point of various communities of professional practice, it is a place where discourse is contested and resisted, shaping knowledge and power.

Chapter 4 situates the work of the thesis within the bodies of literature identified in the review in Chapter 2 by surveying what has been done thus far, what remains to do, and where a suitable starting point for this work might be found. It has then examined in more detail specific processes of conflict and power, a framework for understanding power in a board setting, and has justified their inclusion in an extended model of board effectiveness based on the Forbes and Milliken (1999) framework. A later section discusses the place of the critical view in startup board research.

At this stage of the chapter, an explanation of the way that gaps in the existing research are to be addressed by the work of the thesis is provided, and the research questions that have arisen in response to these gaps presented. The conceptual framework has engendered several propositions that are presented at this point, along with the final model for understanding board effectiveness in startup businesses.

1.3.4 Chapter 5

Chapter 5 is concerned with issues of methodology. The first section discusses the research paradigm in which the thesis is situated. Previous positivist approaches to research in corporate governance have been attentive to structural detail, and have tended to ignore the interpersonal aspects (Hough, McGregor-Lowndes & Ryan, 2005, van Ees, Gabrielsson & Huse, 2009, Huse et al., 2011). The qualitiative approach to research in this thesis seeks to collect data from primary sources, with the researcher as the ‘instrument’, and where the exact nature of the phenomena under study remains to be uncovered (Seamon, 2000).

The next section of the chapter discussed the criteria for inclusion for participants in the study, and has provided a justification for the choice of purposive sampling, and for the use of a small sample in qualitative research of this type. The difficulties in recruiting participants who belong to elite groups,

12 and are time-poor are also canvassed. Following these discussions, the method of collecting data from the participants was considered.

The theoretical framework presented in Chapter 4 has also shaped the choice of the type of data collected, and the way this was interpreted. This is a considered an orthodox approach in phenomenological research (Lopez & Willis, 2004). Semi-structured interviews of participants were held to collect data, then transcribed to text; the interview being the most prevalent method in qualitative corporate governance research (McNulty, Zattoni & Douglas, 2013). The semi-structured interview allowed for some guidance, while still affording the participant sufficient ‘space’ in which to tell their story. This section also discussed and justified the use of the Critical Incident Technique (CIT) to focus the interviewee’s story.

Subsequent sections have addressed the data analysis techniques employed in this thesis in some detail. The first phase of analysis using Interpretitive Phenomenological Analysis (IPA) is described, justified, and discussed, followed by similar presentation of Critical Discourse Analysis (CDA) for the second phase of analysis. A brief discussion of the software tools used in the analyses followed.

The final sections of Chapter 5 consist of discussions of the suitability of the chosen methodology for the research task for which they are employed, the way that quality should and can be judged for qualitative research as opposed to quantitative, and ethical considerations in completing the research project. To close out the chapter, a reflection on the difficulties in the recruitment of sufficient numbers of participants, and particularly of female participants has been given, and speculation that this is one likely cause for the relative paucity of studies of Angel investors offered.

1.3.5 Chapter 6

This chapter presents the results of the two forms of analysis, phenomenological and discursive, in two separate parts. The first section contains a presentation of demographic data collected from participants, presented alongside a brief analysis of data on the individual, the company, and its board.

13 Following this, the interview questions utilized in data collection are discussed, with the role of the Critical Incident Technique (CIT), employed in order to sharpen recollections of lived experiences (Chell, 2004), highlighted.

In Part 1of this chapter, the results from a phenomenological analysis of each investor, company, board combination has been presented as a separate case, presenting an interpretation of the way that the investor experienced their interactions with other board members, in terms of power dynamics and the three types of intra-group conflict (task, relationship & process), and how they felt about the task performance, cohesiveness and overall effectiveness of their board. These cases are followed by a presentation of themes identified in these cases, and the way in which these themes after several coding passes have been grouped in to a set of five superordinate themes that reflect the lived experiences of the Angel investors.

In Part 2 the results from a cross-case analysis using a critical discourse analysis approach are introduced, exploring discourse at the levels of society, discursive practice, and the text. At the meso- level of discursive practice several discursive themes are identified, and similarly to the previous section, grouped together. Several examples of each sub-theme are presented in these sections. In the final sections of Chapter 6, some observations about word choice are made and presented in graphical form.

1.3.6 Chapter 7

In Chapter 7, an interpretation of the results of two analyses performed on the collected data, one using the IPA (Interpretive Phenomenological Analysis) and one CDA (Critical Discourse Analysis), is expounded. A discussion of the way in which these results address the research questions developed to fulfil the aims of this research project gives context and form to the results obtained from analysis, and translates these into findings, propositions, and recommendations for board practitioners and for the direction of further research efforts in related areas.

14 The discussion has been structured by the phenomenological analysis to closely match the format of the research questions, which seek to explore behavioural dynamics affecting board effectiveness in startup companies in Australia, and to compare these to results from the literature derived from other organizational contexts. Insights derived from discourse analysis have been included in the discussion of results to highlight areas where these have reinforced or disconfirmed the phenomenological results, or where they have illuminated new understandings entirely.

After a review of propositions predicted by the theoretical model developed in Chapter 4, the chapter presents a series of critical reflections by the author on assumptions and biases that they may have brought to the research in this thesis, In order that the reader may better make their own interpretations of its contents. The subsequent sections address each of the research questions and impart findings relevant to that question, in addition to a summary of findings from the analyses, and deriving from the demographic data.

The remaining sections of Chapter 7 deal with sixteen propositions derived from the analyses in this study. They may form the basis of future research, as the results suggest that these propositions may in fact better represent lived experience of Angels on the boards of startup business in Australia and perhaps elsewhere than existing literature.

1.3.7 Chapter 8

The final chapter of the thesis summarizes the findings presented in preceding chapters. They are evaluated in relation to their contribution to knowledge in terms of literature, methodology, and practice, of corporate governance, particularly in early stage venture boards; to their contribution to knowledge of conflict processes and power dynamics on boards; and contribution to knowledge of the role of venture investors on startup boards, of entrepreneurial enterprises and informal investors in them.

15 Arising from findings that contribute to practice, a series of actionable recommendations for board practitioners is given, followed by a discussion of the limitations of the research conducted for the thesis, and recommendations for a further research agenda.