Governance and resource interaction in networks. The role of venture capital in a biotech start-up

This paper examines venture capital (VC) governance in innovation processes. The VC literature often presents the relationship between a VC firm and a start-up as dyadic and analyzes it with agency theory. In contrast, this paper deploys the resource interaction framework presented in Håkansson and Waluszewski (2002) to governance and innovation in networks. The paper reports an in-depth case study of Pyrosequencing, a Swedish biotech firm financed with VC. The results from this study reveal how the relationship between a VC and a start-up company is embedded in a wider network and how the governance of the VC spreads in the surrounding network and influences a start-up's possibilities to develop organizational and technical resource interfaces to critical counterparts such as suppliers and customers.

► This paper explores the role of VC governance in the innovation processes. ► In doing this, we adopt an industrial network perspective. ► VC governance favor a streamlined and speedy development process. ► This required an early freezing of technical and organizational resources. ► This restricts possibilities for re-combination of resources when network changes.