Board Information and Strategic Tasks Performance

• Date: 01 September 2010
• DOI: http://doi.org/10.1111/j.1467-8683.2010.00816.x
• Published date: 01 September 2010
• Author: Pingying Zhang

Board Information and Strategic

Tasks Performancecorg_816473..487

Pingying Zhang*

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: Examining how corporate boards can create a sustainable competitive advantage is an under-

studied area of research in corporate governance. This area of research is advanced in this study, which examines: How can

boards improve the performance of their strategic tasks by using their information advantages?

Research Findings/Insights: The study examines 318 responses of CEOs from survey data collected in the years 2003 and

2005 from Norway. We found differences between using diverse information and possessing diverse information. Using

diverse information has a higher impact on the board’s current strategic tasks performance than possessing diverse

information. However, possessing diverse information is more likely to improve both the board’s current and future

strategic tasks performance than using diverse information.

Theoretical/Academic Implications: First, this study has extended the analysis of board capital by including a dynamic

dimension of using diverse information. Second, this study links a resource-based view with a perspective of information

biases in a diverse group. Diverse information is valuable for improving the quality of group decision-making; however,

improper use of diverse information due to informationbiases could reduce the quality.We thus suggest examining possible

behavioral biases in using informationin a diverse board, specif‌ically through each of the three practices of open discussion,

effective leadership, and active search.

Practitioner/Policy Implications: Controlling sampling, repetition, and evaluation biases is necessary in a diverse board. It

helps to reduce behavioral biases, and therefore ensure the quality of using diverse information. Consequently, it improves

the board’s current strategic tasks performance that may not necessarily be achieved by merely having a diverse board.

Keywords: Corporate Governance, Information Diversity, Behavioral Biases, Strategic Tasks Performance, Competitive

Advantages

INTRODUCTION

Studies about corporate boards have started to explore

the issues that make the board a source of competitive

advantage instead of merely a legal formality. A framework

of board capital (Hillman & Dalziel, 2003) points out that

competitiveness lies in directors’ competence and is

ref‌lected in their collective expertise, experience, and net-

works. In essence, board capital succinctly captures what

directors know. However, directors are generally knowl-

edgeable persons for both failed and successful f‌irms (Son-

nenfeld, 2002). Perhaps, studying additional factors other

than what directors know can help us better understand the

board as a source of competitiveness. One such factor is

what directors do. This study addresses the research ques-

tion: How can boards improvethe performance of their stra-

tegic tasks by using their information advantages?

The board’sstrategic involvement is a central task of direc-

tors. It affects not only the top management team’s perfor-

mance (Kim, Burns, & Prescott, 2009), but also the f‌irm’s

performance (Andrews, 1981a, 1981b; Charan, 1998, 2005;

Huse, 2007; Judge & Zeithaml, 1992; Stiles & Taylor, 2002:31–

53; Zahra, 1990; Zahra & Pearce, 1990), and studies on

the board’s strategic tasks have captured a growing research

attention (Pugliese, Bezemer, Zattoni, Huse, Van den Bosch,

& Volberda, 2009). The board’s strategic tasks ref‌lect

“the development, maintenance and monitoring of the

f‌irms’ core competencies with the purpose of achieving

long-term results and survival. Strategic decision-making

involves resolving uncertainty, complexity and conf‌licts”

(Huse, 2007:239). In other words, the board’s strategic tasks

performance is a source of competitiveness, which can

*Address for correspondence: Pingying Zhang, Department of Management,Univer-

sity of North Florida, 1 UNF Drive, Jacksonville,FL 32224, USA. Tel: 904-620-2249; Fax:

904-620-2782; E-mail: pingying.zhang@unf.edu

473

Corporate Governance: An International Review, 2010, 18(5): 473–487

© 2010 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2010.00816.x