The Strategic Role of the Board: The Impact of Board Structure on Top Management Team Strategic Action Capability

Abstract

Manuscript Type:Conceptual Research Question/Issue:Board reforms around the globe, corporate governance failures, and equivocal research findings provide the impetus for studying boards from a perspective different from the current emphasis on control and service roles. A board's strategic role is conceptualized and the impact of board diversity and leadership structure on the speed and breadth of top management team (TMT) strategic capabilities is explicated. Research Findings/Insights:Four board configurations are identified by examining the joint impact of diversity and leadership. Each configuration differentially influences TMT strategic action capabilities. We then propose that the nature of the competitive environment (dynamism and complexity) impacts the effectiveness of a particular configuration. Testable propositions applicable in communitarian, Anglo‐Saxon, and emerging markets are developed in a manner that leverages current theoretical insights and empirical findings. Theoretical/Academic Implications:Theorizing that board strategic control manifests in multiple forms and influences TMT strategic capabilities in nuanced ways highlights how particular board configurations differentially impact firm processes and outcomes. This approach links the board, TMT, and competitive rivalry literatures, providing a potential explanation for mixed research findings, and suggests directions for future research. Practitioner/Policy Implications:Universally prescribed board configurations may be harmful to firm and industry performance as well as national economies. Specific board configurations differentially impact TMT capabilities and should be properly aligned with environmental contexts. Those charged with governance design and board configuration should be cognizant of how the diversity and leadership of strategically involved boards influences the speed and breadth of TMT strategic action capabilities.