Thinking Broad and Deep: Why Some Directors Exert an Outsized Influence on Strategic Change

Razvan Lungeanu () and Edward J. Zajac ()
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Razvan Lungeanu: Northeastern University, Boston, Massachusetts 02115
Edward J. Zajac: Northwestern University, Evanston, Illinois 60208

Organization Science, 2019, vol. 30, issue 3, 489-508

Abstract: 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.

Keywords: corporate governance; boards of directors; strategic change; newly public firms; broad and deep expertise; adaptive expertise (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:30:y:2019:i:3:p:489-508

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