Toward a synthesis of the board‐strategy relationship: A literature review and future research agenda

• Published date: 01 January 2023
• Author: Pieter‐Jan Bezemer,Amedeo Pugliese,Gavin Nicholson,Alessandro Zattoni
• Date: 01 January 2023
• DOI: http://doi.org/10.1111/corg.12481

REVIEW ARTICLE

Toward a synthesis of the board-strategy relationship:

A literature review and future research agenda

Pieter-Jan Bezemer

1

| Amedeo Pugliese

2,3

| Gavin Nicholson

4

|

Alessandro Zattoni

5

1

School of Business & Law, Edith Cowan

University, Perth, Western Australia, Australia

2

Department of Economics and Management,

Università degli Studi di Padova, Padova, Italy

3

Department of Economics and Business,

Pompeu Fabra University, Barcelona, Spain

4

School of Accountancy, Queensland

University of Technology, Brisbane,

Queensland, Australia

5

Department of Business and Management,

LUISS Guido Carli, Rome, Italy

Correspondence

Pieter-Jan Bezemer, School of Business & Law,

Edith Cowan University, Perth, Western

Australia, Australia.

Email: p.bezemer@ecu.edu.au

Funding information

Università degli Studi di Padova, Grant/Award

Number: Internal research grant

Abstract

Research Question/Issue: The strategy role of the board of directors is a contentious

topic in both theory and practice and the debate on what boards should or should

not do around firm strategy has intensified with changes in global corporate gover-

nance. Boards face interventionist regulatory developments, calls for changes in their

composition, growing owner engagement, and societal questioning on the corpora-

tion's very purpose. With this review, we aim to assess how the research agenda in

this area has evolved with these developments.

Research Findings/Results: Our analysis of 152 articles published in 45 high-quality

journals between 2008 and 2020 reveals that the board-strategy literature remains

dominated by traditional input–output approaches using archival data. There are,

however, some green shoots opening up the debate by recognizing the importance

of the firm's specific context, applying alternative or complementary theoretical

lenses, exploring the underlying dynamics and processes, and using more sophisti-

cated modeling techniques.

Theoretical implications: We identify three research directions with the potential to

advance the research agenda, namely, untangling the complex, multilevel interplay

between stakeholders involved in the strategy process, embracing the processual and

temporal nature of the board-strategy relationship, and unpacking the impact of

social context to understand when boards matter for strategy.

Practical implications: Our results indicate that the strategy role of the board is

evolving and broadening. Most notably the integration of CSR-related themes into

the board-strategy debate, and the leveraging of board diversity in strategic decision-

making appear to be important issues for contemporary boards.

KEYWORDS

corporate governance, board of directors, strategy, literature review

Received: 27 February 2021 Revised: 17 June 2022 Accepted: 1 July 2022

DOI: 10.1111/corg.12481

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium,

provided the original work is properly cited.

© 2022 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.

178 Corp Govern Int Rev. 2023;31:178–197.

wileyonlinelibrary.com/journal/corg

1|INTRODUCTION

The strategy role of the board has garnered considerable attention

both from research (Judge & Talaulicar, 2017; Pugliese et al., 2009)

and practice (McKinsey, 2016). Initially, researchers sought to tackle

two key questions: (i) Whether boards should be involved in strategy

and, if so, (ii) how much they actually were involved in strategic

decision-making (Fama & Jensen, 1983a; Stiles, 2001). The first ques-

tion has largely been answered as it is widely accepted that contribut-

ing to strategy formulation and control is one of the primary roles of

the board (Adams, 2017; Hillman & Dalziel, 2003). Both scholars and

practitioners acknowledge directors' legal obligations to determine

the organization's long-term direction (Adams et al., 2010; Hendry

et al., 2010). Consequently, boards are also increasingly considered

accountable for their firm's performance (Kim et al., 2009; Klarner

et al., 2021; Nahum & Carmeli, 2020).

A significant body of academic work contributes to the second

question by exploring how and when boards contribute to strategic

decision-making (Deutsch, 2005; Johnson et al., 1996; Westphal &

Garg, 2021; Zahra & Pearce, 1989). However, despite this effort,

existing systematic literature reviews are critical of the field's pro-

gress. Specifically, previous reviews suggest that academic work is dis-

tant from the phenomenon of interest and may not reflect the

changing nature of board involvement in strategy. For example, Pugli-

ese et al. (2009, p. 292) called for additional studies “to examine the

impact of institutional and context-specific factors on the (expected)

contribution of boards to strategy, and to apply alternative methods

to fully capture the impact of board processes and dynamics on strat-

egy making.”Similarly, Judge and Talaulicar (2017, p. 139) noted that

“we need a balanced approach in our research designs and currently

there are too many research designs relying on archival data that infer

actual board behavior.”It is unclear whether more recent research

addresses these challenges. After decades of academic effort, is there

any more clarity around the board-strategy relationship, or does it

remain clouded?

Updating our understanding of the board's role in strategy is

important as boards likely adapt their approach to strategy in

response to impactful environmental shifts. The past two decades

have seen a range of such changes. First, large-scale accounting frauds

(e.g., Enron, Parmalat, Tyco, and WorldCom), and the unexpected col-

lapse of financial institutions (e.g., Lehman Brothers, Bear Stearns, and

Merrill Lynch) during the global financial crisis, prompted a series of

regulatory changes that fundamentally alter directors' duties and

board standards. These changes emphasize the role of director inde-

pendence and board monitoring (Cuomo et al., 2016; Financial

Reporting Council, 2018), potentially affecting directors' involvement

into strategy (Bezemer et al., 2007; Du Plessis, 2008). A second shift

relates to changes in ownership structures resulting from growing

institutional investors' activism and the internationalization of share-

holders bases (Filatotchev et al., 2020; Franks, 2020). These changes

may fundamentally alter the board's strategic role, as large institu-

tional investors have the power and motivation to promote new stra-

tegic directions or to monitor the board's strategic decisions. Third,

organizations face increasing pressure from stakeholders to produce a

positive long-term impact on the societies in which they are

embedded. The social and environmental concerns are prompting

firms to revisit their corporate purpose (Flammer & Ioannou, 2021;

Zattoni & Pugliese, 2021) and to change their board composition

(e.g., increasing diversity, independence, the separation between chair

and CEO, and use of board committees). Since boards and directors

are at the forefront of managing and addressing such expectations,

these changes may have important implications for board objectives

and measures of strategic success. For example, boards may increas-

ingly include environmental and social KPIs alongside traditional

accounting and financial measures.

While recent studies have started to adopt different methodolo-

gies (e.g., Machold & Farquhar, 2013; Walrave et al., 2015), incorpo-

rate context (e.g., Garg & Eisenhardt, 2017; Heyden et al., 2015),

gather data concerning board strategic decision-making (e.g., Klarner

et al., 2020; Meyfroodt & Desmidt, 2021; Tuggle et al., 2010), and

explore the nexus between boards and wider strategy developments

(e.g., Chen et al., 2016; Dalla Via & Perego, 2018; Helfaya &

Moussa, 2017), it is unclear if and how the field has systematically

advanced our understanding of the evolution of the boards' strategy

role. For instance, has increased environmental turbulence changed

how boards engage in strategy, and has a strong emphasis on risk

management, compliance, and financial information inadvertently

shifted the focus of boards away from strategy? Given the growing

research around the topic, it appears timely to review the more

recent literature and critically reflect on the direction in which the

field has been developing. Accordingly, our research question is:

What are the significant developments evident in recent board-

strategy research?

To answer this research question, we identified and coded

152 articles published on boards and strategy in 45 high-quality jour-

nals between 2008 and 2020. We used the year 2008 as the starting

point of our inquiry, as (i) during that time the global financial crisis

significantly reshaped the governance landscape around the globe,

and (ii) the literature review by Pugliese et al. (2009) captured the

developments in the debate up to that point. By analyzing this body

of research, we contribute to previous reviews on the topic in two

important ways. First, a critical evaluation of the literature highlights

that while research interest in the subject continues to grow, there

are several major gaps hampering a fuller development of the field.

Our analysis of four broad research clusters evident in current

research suggests—at a higher level—a need for better conceptualiza-

tion and more precise measurement of (i) the role and impact of the

board as part of a wider group of strategic decision-makers, (ii) the

process and temporal mechanisms explaining the connections

between inputs and outputs, and (iii) the importance of “context,”

within or outside corporations. Since addressing these challenges will

require innovative research designs, our review points to ways in

which both quantitative and qualitative studies might enrich the

debate.

Second, our review suggests that the strategy role of the board is

evolving following recent social and business-related trends. Most

BEZEMER ET AL.179