Dynamic board capabilities: Developing board practices that impact corporate renewal and performance

Liselotte Engstam, Henrik Forzelius, Mats Magnusson, Fernanda Torre and Ludo Van Der Heyden
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Liselotte Engstam: Founder, Digoshen, Adviser and Research Scientist and Professional Board Member, Sweden
Henrik Forzelius: Doctoral Student, Department of Engineering Design, KTH Royal Institute of Technology, Sweden
Mats Magnusson: Professor, Department of Engineering Design, KTH Royal Institute of Technology, Sweden
Fernanda Torre: CEO Next Agents, Affiliated with the House of Innovation, Stockholm School of Economics, Sweden
Ludo Van Der Heyden: Chaired Professor Emeritus in Corporate Governance, INSEAD and Distinguished Scholar, International Institute for Management Development, Switzerland

Journal of Risk Management in Financial Institutions, 2024, vol. 17, issue 2, 142-160

Abstract: A crucial requirement for firms to remain competitive is to consistently and simultaneously engage in exploratory and exploitative activities. The academic literature has broadly accepted that the development of dynamic capabilities (ie firms' abilities to create, reconfigure and improve resources and capabilities to fit their changing environments) are vital to meeting this competitive requirement. Research has predominately addressed these dynamic capabilities from a management perspective. Little attention has been paid to the influence of the board of directors on these firm capabilities even though boards hold the fiduciary responsibility for the corporation and its long-term viability. Even less has been written on how boards ought to organise themselves and develop their dynamic board capabilities to support and govern corporate renewal and performance effectively. This paper aims to start addressing this gap by using two related aims. First, a process framework for board behaviours is proposed that ensures, and supports, a systematic way of building and developing corporate-level dynamic capabilities. Then, evidence is presented and reviewed from a survey of two board member communities which supports the idea that board capabilities are essential for a firm's successful renewal and economic performance, and need to be improved in practice. This framework is closely aligned with well-established components identified by the management literature but differs in having the board as the unit of analysis. A crucial question and action agenda is proposed for boards eager to acquire and develop their dynamic capabilities.

Keywords: board of directors; dynamic capabilities; governance; innovation; organisation; performance; strategy (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2024
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