| A Network Perspective on How Outside Directors Impact Strategic Decision Making |
| | Carpenter, Mason A. | U. of Wisconsin, Madison | mcarpenter@bus.wisc.edu | (608) 262-9449 |
| | Westphal, James D. | U. of Texas, Austin | westphal@bus.utexas.edu | (512) 471-5286 |
| | Prior research has given little consideration to external determinants of knowledge and perspective that may affect directors' ability to contribute to the strategic decision making process. We introduce a framework on board involvement in which the potential for outside directors to contribute to firm governance and strategic decision making (i.e., in the form of monitoring and advising top management) is critically influenced by (1) whether they hold appointments to other firms with more or less-related product, corporate, and international strategies, and (2) whether such a portfolio of board appointments is suited to the degree of environmental instability surrounding the focal firm. Hypotheses are tested with a comprehensive data set that combines archival reports with behavioral data obtained through surveys of Fortune 1000 outside directors and CEOs. The findings suggest that while the simple number of director appointments to other boards has no effect on board monitoring and advice-giving, appointments that can provide directors with relevant strategic knowledge and perspective do predict the board's ability to contribute to the strategic decision making process. Support for this framework helps answer recent calls for board research that examines the "substantive context" of outside board appointments, and moves our understanding beyond the number of such appointments or director independence as predictors of board decision making. The findings also show the potential power of models that link the broader, social-structural and environmental context in which boards are embedded with micro-behavioral processes that occur inside the "black box" of corporate boards. |
| | Keywords: Corporate Goverance; Corporate Strategy; Networks |
| Director Strategic Contribution and Organizational Performance in Entrepreneurial Firms |
| | Gilley, K. Matthew | Oklahoma State U. | gilleykm@jmu.edu | (540) 568-3025 |
| | Ford, Roger H. | James Madison U. | fordrh@jmu.edu | (540)-568-3228 |
| | Coombs, Joseph E. | James Madison U. | coombsje@jmu.edu | (540)-568-3238 |
| | The influence of boards of directors on firm performance has been widely studied, and boards have been found to influence a variety of firm outcomes. Most research examining the effects of boards of directors on firm performance has been concerned with board composition issues in large firms. In those studies, board size, the existence of outsiders, and the proportion of outsiders on the board were frequently hypothesized to be predictors of firm performance. In studies of entrepreneurial firms, board size and board composition have also been viewed as predictors of firm performance. Two critical areas of governance minimally addressed by existing studies of either large or entrepreneurial firms are first, the role of boards of directors in private firms, and second, the strategic contribution of board members. Our research fills this gap by examining director strategic contribution in a sample of private, entrepreneurial firms.
Our results suggest that the extent to which outside board members perform their strategy role has a significant, positive influence on firm performance. Insider contribution had no effect. We also found that both firm size and firm age are moderators of the relationship between board strategic contribution and firm performance. Specifically, we found that a board’s strategic contribution has a more profound (and positive) influence on the performance of younger and smaller firms.
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| | Keywords: governance; private; performance |
| CEO Duality, Board Composition and Firm Performance: New Evidence from China's Private Firms |
| | Liang, Neng | Loyola College, Maryland | Nliang@loyola.edu | 410-617-2000 |
| | Li, Joanne | Loyola College, Maryland | jli@loyola.edu | 410-617-5192 |
| | This study examines the board structure/firm performance relationship in a sample of 228 small private firms in Shanghai, China. Because of the nature of their small size and private ownership, board structure of such firms is believed to be, ex ante, firm performance-enhancing, and the structure/performance relationship is easier to identify. Empirical findings indicate that most of the private firms adopt an insider-dominated board structure, but the ratio of outside directors to total board members is positively associated with higher return on investment. Duality of titles and board size does not matter in firm performance. Also, firms believe themselves technologically advanced and with competent managers are related to higher firm performances. Managerial and research implications are discussed. |
| | Keywords: board composition; corporate governance; China's private firms |
| Antecedents of the Adoption of Outside Boards by Small Private Firms |
| | Fiegener, Mark | U. of Puget Sound | mfiegener@ups.edu | (253)-756-8242 |
| | Antecedents of the Adoption of Outside Boards by Small Private Firms |
| | Keywords: small business; boards governance |