TY - JOUR
T1 - Thinking broad and deep
T2 - Why some directors exert an outsized influence on strategic change
AU - Lungeanu, Razvan
AU - Zajac, Edward J.
N1 - Funding Information:
The authors acknowledge the helpful comments of Robert Dewar, J. P. Eggers, Sam Garg, Henrich Greve, Donald Hambrick, Paul Hirsch, Vilmos Misangyi, Klaus Weber, and David H. Zhu; seminar participants at IESE Business School, INSEAD, Northeastern University, and Purdue University; and Organization Science Senior Editor Giovanni Gavetti and two anonymous reviewers. They also thank the Zell Center for Risk Research at Northwestern University for providing financial assistance and David Torres, Nadia Hlebowitsh, and Margaret Hlebowitsh for their data collection assistance.
Publisher Copyright:
© 2019 INFORMS.
PY - 2019/5/1
Y1 - 2019/5/1
N2 - This study addresses the oft-debated questions of whether, when, and how corporate board members help shape firm strategy by advancing a new perspective on heterogeneous director influence that introduces the notion of the deep/broad director. Specifically, we take a sociocognitive and sociopolitical perspective on governance to suggest that deep/broad new outside directors, whose expertise results from a blend of depth and breadth of experience, will have an outsized influence in shaping firm strategy. We test our theory using an extensive multiyear data set that tracks all firms that went through an initial public offering in the United States across multiple business cycles (1997, 2001, and 2004) until 2011. Focusing on new outside directors in their first year of service (and controlling for selection issues), our results support our main prediction that those directors whose prior experiences are both deep and broad are the most influential directors for strategic change. We find this result to be robust for multiple indicators of strategic change. We also explore whether the outsized influence of the deep/broad director on strategic change may vary by differences in a board's openness to strategic change. We conclude by highlighting the relevance of our approach and findings for future research and debates on director selection and director expertise.
AB - This study addresses the oft-debated questions of whether, when, and how corporate board members help shape firm strategy by advancing a new perspective on heterogeneous director influence that introduces the notion of the deep/broad director. Specifically, we take a sociocognitive and sociopolitical perspective on governance to suggest that deep/broad new outside directors, whose expertise results from a blend of depth and breadth of experience, will have an outsized influence in shaping firm strategy. We test our theory using an extensive multiyear data set that tracks all firms that went through an initial public offering in the United States across multiple business cycles (1997, 2001, and 2004) until 2011. Focusing on new outside directors in their first year of service (and controlling for selection issues), our results support our main prediction that those directors whose prior experiences are both deep and broad are the most influential directors for strategic change. We find this result to be robust for multiple indicators of strategic change. We also explore whether the outsized influence of the deep/broad director on strategic change may vary by differences in a board's openness to strategic change. We conclude by highlighting the relevance of our approach and findings for future research and debates on director selection and director expertise.
UR - http://www.scopus.com/inward/record.url?scp=85067239524&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85067239524&partnerID=8YFLogxK
U2 - 10.1287/orsc.2018.1258
DO - 10.1287/orsc.2018.1258
M3 - Article
AN - SCOPUS:85067239524
SN - 1047-7039
VL - 30
SP - 489
EP - 508
JO - Organization Science
JF - Organization Science
IS - 3
ER -