IDEAS home Printed from https://ideas.repec.org/a/kap/jmgtgv/v24y2020i4d10.1007_s10997-019-09492-y.html
   My bibliography  Save this article

The impact of board diversity on strategic change: a stakeholder perspective

Author

Listed:
  • Laura Padilla-Angulo

    (Universidad Loyola)

Abstract

This article uses the US freight railroads, which underwent enforced restructuring due to increased competition following deregulation, to study the impact of board diversity on strategic change, where board diversity is measured from a stakeholder perspective. CEO human capital is also taken into account. By analyzing with panel data methodology a sample including 15 US Class I railroads covering a 20-year period from 1984 to 2004 and representing more than 90% of the railroad market, with a total of 190 observations, we find that strategic decisions are significantly influenced by both board composition and CEO human capital, but that boards exercise more influence in determining firms strategies. We find significant differences in the way directors influence restructuring decisions depending on their stakeholder status. Results indicate the importance of including measures of board composition reflecting diversity of interests in board research.

Suggested Citation

  • Laura Padilla-Angulo, 2020. "The impact of board diversity on strategic change: a stakeholder perspective," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(4), pages 927-952, December.
    • Handle: RePEc:kap:jmgtgv:v:24:y:2020:i:4:d:10.1007_s10997-019-09492-y
    DOI: 10.1007/s10997-019-09492-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10997-019-09492-y
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10997-019-09492-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jianyun Tang & Mary Crossan & W. Glenn Rowe, 2011. "Dominant CEO, Deviant Strategy, and Extreme Performance: The Moderating Role of a Powerful Board," Journal of Management Studies, Wiley Blackwell, vol. 48(7), pages 1479-1503, November.
    2. Laura Padilla Angulo, 2013. "Labour inputs substitution during corporate restructuring: a translog model approach for US freight railroads," Applied Economics, Taylor & Francis Journals, vol. 45(18), pages 2547-2562, June.
    3. John Child & Chris Smith, 1987. "The Context And Process Of Organizational Transformation ‐ Cadbury Limited In Its Sector," Journal of Management Studies, Wiley Blackwell, vol. 24(6), pages 565-593, November.
    4. Mario Minoja, 2012. "Stakeholder Management Theory, Firm Strategy, and Ambidexterity," Journal of Business Ethics, Springer, vol. 109(1), pages 67-82, August.
    5. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    6. James D. Westphal & James W. Fredrickson, 2001. "Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy," Strategic Management Journal, Wiley Blackwell, vol. 22(12), pages 1113-1137, December.
    7. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    8. Chih-shun Hsu & Wei-hung Lai & Sin-hui Yen, 2019. "Boardroom Diversity and Operating Performance: The Moderating Effect of Strategic Change," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2448-2472, September.
    9. Motohiro Nakauchi & Margarethe F. Wiersema, 2015. "Executive succession and strategic change in Japan," Strategic Management Journal, Wiley Blackwell, vol. 36(2), pages 298-306, February.
    10. Vincent L. Barker , III & George C. Mueller, 2002. "CEO Characteristics and Firm R&D Spending," Management Science, INFORMS, vol. 48(6), pages 782-801, June.
    11. Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, vol. 61(2), pages 689-724, April.
    12. Tod Perry & Anil Shivdasani, 2005. "Do Boards Affect Performance? Evidence from Corporate Restructuring," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1403-1432, July.
    13. Razvan Lungeanu & Edward J. Zajac, 2019. "Thinking Broad and Deep: Why Some Directors Exert an Outsized Influence on Strategic Change," Organization Science, INFORMS, vol. 30(3), pages 489-508, May.
    14. Katalin Takacs Haynes & Amy Hillman, 2010. "The effect of board capital and CEO power on strategic change," Strategic Management Journal, Wiley Blackwell, vol. 31(11), pages 1145-1163, November.
    15. Pol Herrmann & Deepak K Datta, 2002. "CEO Successor Characteristics and the Choice of Foreign Market Entry Mode: An Empirical Study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 551-569, September.
    16. Daniel Kipkirong Tarus & Federico Aime, 2014. "Board demographic diversity, firm performance and strategic change," Management Research Review, Emerald Group Publishing Limited, vol. 37(12), pages 1110-1136, November.
    17. Chris Cornforth, 2001. "What Makes Boards Effective? An examination of the relationships between board inputs, structures, processes and effectiveness in non‐profit organisations," Corporate Governance: An International Review, Wiley Blackwell, vol. 9(3), pages 217-227, July.
    18. Jerry Goodstein & Kanak Gautam & Warren Boeker, 1994. "The effects of board size and diversity on strategic change," Strategic Management Journal, Wiley Blackwell, vol. 15(3), pages 241-250, March.
    19. Renée B. Adams & Patricia Funk, 2012. "Beyond the Glass Ceiling: Does Gender Matter?," Management Science, INFORMS, vol. 58(2), pages 219-235, February.
    20. Stiles, Philip & Taylor, Bernard, 2001. "Boards at Work: How Directors View their Roles and Responsibilities," OUP Catalogue, Oxford University Press, number 9780198288763.
    21. Giacomo Boesso & Fabrizio Cerbioni & Andrea Menini & Antonio Parbonetti, 2017. "The role of the board in shaping foundations’ strategy: an empirical study," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(2), pages 375-397, June.
    22. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    23. Guido Friebel & Gerard McCullough & Laura Padilla, 2016. "Product Market Deregulation's Winners and Losers: US Railroads between 1981 and 2001," Working Papers 2016-005, Universidad Loyola Andalucía, Department of Economics.
    24. Deepak K. Datta & James P. Guthrie, 1994. "Executive succession: Organizational antecedents of ceo characteristics," Strategic Management Journal, Wiley Blackwell, vol. 15(7), pages 569-577, September.
    25. Melinda Muth & Lex Donaldson, 1998. "Stewardship Theory and Board Structure: a contingency approach," Corporate Governance: An International Review, Wiley Blackwell, vol. 6(1), pages 5-28, January.
    26. Humphry Hung, 1998. "A typology of the theories of the roles of governing boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 6(2), pages 101-111, April.
    27. García-Meca, Emma & García-Sánchez, Isabel-María & Martínez-Ferrero, Jennifer, 2015. "Board diversity and its effects on bank performance: An international analysis," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 202-214.
    28. Jana Oehmichen & Sebastian Schrapp & Michael Wolff, 2017. "Who needs experts most? Board industry expertise and strategic change—a contingency perspective," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 645-656, March.
    29. Christopher S. Tuggle & David G. Sirmon & Christopher R. Reutzel & Leonard Bierman, 2010. "Commanding board of director attention: investigating how organizational performance and CEO duality affect board members' attention to monitoring," Strategic Management Journal, Wiley Blackwell, vol. 31(9), pages 946-968, September.
    30. Helen Kang & Mandy Cheng & Sidney J. Gray, 2007. "Corporate Governance and Board Composition: diversity and independence of Australian boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 194-207, March.
    31. Brian R. Golden & Edward J. Zajac, 2001. "When will boards influence strategy? inclination × power = strategic change," Strategic Management Journal, Wiley Blackwell, vol. 22(12), pages 1087-1111, December.
    32. Morten Huse & Violina Rindova, 2001. "Stakeholders' Expectations of Board Roles: The Case of Subsidiary Boards," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(2), pages 153-178, June.
    33. Byrd, Daniel T. & Mizruchi, Mark S., 2005. "Bankers on the board and the debt ratio of firms," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 129-173, March.
    34. Wincent, Joakim & Anokhin, Sergey & Örtqvist, Daniel, 2010. "Does network board capital matter? A study of innovative performance in strategic SME networks," Journal of Business Research, Elsevier, vol. 63(3), pages 265-275, March.
    35. Orlando Curtae' Richard & Jie Wu & Livia Anna Markoczy & Yunhyung Chung, 2019. "Top management team demographic‐faultline strength and strategic change: What role does environmental dynamism play?," Strategic Management Journal, Wiley Blackwell, vol. 40(6), pages 987-1009, June.
    36. Ann F. Friedlaender & Ernst R. Berndt & Gerard McCullough, 1992. "Governance Structure, Managerial Characteristics, and Firm Performance in the Deregulated Rail Industry," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992 Micr), pages 95-186.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Timo Tremml & Sabine Löbbe & Andreas Kuckertz, 2022. "Board behavior’s impact on entrepreneurial orientation in public enterprises," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1183-1211, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ben Slimane, Faten & Padilla Angulo, Laura, 2019. "Strategic change and corporate governance: Evidence from the stock exchange industry," Journal of Business Research, Elsevier, vol. 103(C), pages 206-218.
    2. Carl Åberg & Mariateresa Torchia, 2020. "Do boards of directors foster strategic change? A dynamic managerial capabilities perspective," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 655-684, September.
    3. Franco Ernesto Rubino & Paolo Tenuta & Domenico Rocco Cambrea, 2017. "Board characteristics effects on performance in family and non-family business: a multi-theoretical approach," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 623-658, September.
    4. Francesca Collevecchio & Gianluca Gionfriddo, 2023. "Adopting a social purpose in for-profit firms: the role of the board of directors," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1467-1499, September.
    5. Asad, Muhammad & Akbar, Saeed & Li, Jing & Shah, Syed Zulfiqar Ali, 2023. "Board diversity and corporate propensity to R&D spending," International Review of Financial Analysis, Elsevier, vol. 89(C).
    6. Elizabeth N. K. Lim & Brian T. McCann, 2014. "Performance Feedback and Firm Risk Taking: The Moderating Effects of CEO and Outside Director Stock Options," Organization Science, INFORMS, vol. 25(1), pages 262-282, February.
    7. Ooi, Chai-Aun & Hooy, Chee-Wooi & Mat Som, Ahmad Puad, 2015. "Diversity in human and social capital: Empirical evidence from Asian tourism firms in corporate board composition," Tourism Management, Elsevier, vol. 48(C), pages 139-153.
    8. Datta, Deepak K. & Basuil, Dynah A. & Agarwal, Ankita, 2020. "Effects of board characteristics on post-acquisition performance: A study of cross-border acquisitions by firms in the manufacturing sector," International Business Review, Elsevier, vol. 29(3).
    9. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2017. "Supervisory boards, financial crisis and bank performance: do board characteristics matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 310-337, November.
    10. Nguyen, Tuan & Nguyen, An & Nguyen, Mau & Truong, Thuyen, 2021. "Is national governance quality a key moderator of the boardroom gender diversity–firm performance relationship? International evidence from a multi-hierarchical analysis," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 370-390.
    11. Iwasaki, Ichiro & 岩﨑, 一郎 & イワサキ, イチロウ, 2007. "Endogenous board formation and its determinants in a transition economy: evidence from Russia," CEI Working Paper Series 2007-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    12. Santiago Kopoboru & Gloria Cuevas-Rodríguez & Leticia Pérez-Calero, 2020. "Boards that Make a Difference in Firm’s Acquisitions: The Role of Interlocks and Former Politicians in Spain," Sustainability, MDPI, vol. 12(3), pages 1-19, January.
    13. Pugliese, A. & Bezemer, P.J. & Zattoni, A. & Huse, M. & van den Bosch, F.A.J. & Volberda, H.W., 2009. "Boards of Directors’ Contribution to Strategy: A Literature Review and Research Agenda," ERIM Report Series Research in Management ERS-2009-013-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    14. Huang, Peng & Lu, Yue & Wu, Ji, 2023. "Does board diversity in industry-experience boost firm value? The role of corporate innovation," Economic Modelling, Elsevier, vol. 128(C).
    15. Akbar, Muhammad & Hussain, Shahzad & Ahmad, Tanveer & Hassan, Shoib, 2020. "Corporate Governance and Firm Performance in Pakistan: Dynamic Panel Estimation," CAFE Working Papers 6, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    16. Rania Béji & Ouidad Yousfi & Abdelwahed Omri, 2020. "Corporate Social Responsibility and Corporate Governance: A cognitive approach," Post-Print hal-03144756, HAL.
    17. Romano, Giulia & Guerrini, Andrea, 2014. "The effects of ownership, board size and board composition on the performance of Italian water utilities," Utilities Policy, Elsevier, vol. 31(C), pages 18-28.
    18. Paolo Roffia & Virginia Simón-Moya & Javier Sendra García, 2022. "Board of director attributes: effects on financial performance in SMEs," International Entrepreneurship and Management Journal, Springer, vol. 18(3), pages 1141-1172, September.
    19. Choi, Seong-jin & Liu, Huilong & Yin, Jun & Qi, Yunfei & Lee, Jeoung Yul, 2021. "The effect of political turnover on firms’ strategic change in the emerging economies: The moderating role of political connections and financial resources," Journal of Business Research, Elsevier, vol. 137(C), pages 255-266.
    20. Michael K. Bednar & Steven Boivie & Nicholas R. Prince, 2013. "Burr Under the Saddle: How Media Coverage Influences Strategic Change," Organization Science, INFORMS, vol. 24(3), pages 910-925, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jmgtgv:v:24:y:2020:i:4:d:10.1007_s10997-019-09492-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.