TITLE

A NETWORK PERSPECTIVE ON HOW OUTSIDE DIRECTORS IMPACT STRATEGIC DECISION MAKING

AUTHOR(S)
CARPENTER, MASON A.; WESTPHAL, JAMES D.
PUB. DATE
August 1999
SOURCE
Academy of Management Proceedings & Membership Directory;1999, pA1
SOURCE TYPE
Conference Proceeding
DOC. TYPE
Article
ABSTRACT
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.
ACCESSION #
27623102

 

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