Attention, Please! Outside Expertise and Entrepreneurial Success

I examine whether and how outside expertise of directors matters for start-up companies. I exploit the fact that some directors sit on multiple boards simultaneously and study the effects of director attention on a focal company’s performance and growth. Identification comes from leveraging distraction events at directors’ other companies that plausibly shock their attention. I find that an increase in a company's fraction of directors who are distracted leads to a decline in return on assets (ROA) and sales growth, especially if distracted directors are more experienced. Effect sizes represent 8% and 13% of the sample median of ROA and sales growth, which is larger than what prior literature has documented for public companies