Advertisement

Do boards of directors foster strategic change? A dynamic managerial capabilities perspective

  • Carl ÅbergEmail author
  • Mariateresa Torchia
Article
  • 35 Downloads

Abstract

The purpose of this study is to understand the dynamic relationships between managerial human capital, dynamic managerial capabilities and strategic change within boards of directors. Building on the dynamic managerial capabilities perspective and upper echelons theory, we theorize and investigate the impact of managerial human capital on strategic change as well as the mediating role of boards’ sensing, seizing and reconfiguring abilities, defined as dynamic managerial capabilities. The hypotheses are tested on a sample of 606 Norwegian firms. The main findings suggest that while managerial human capital positively impacts strategic change, boards’ sensing and seizing abilities (not reconfiguring) positively mediate the relationship between human capital and strategic change. Implications for theory and practice are discussed.

Keywords

Boards of directors Dynamic managerial capabilities Upper echelon Strategic change 

Notes

References

  1. Adner, R., & Helfat, C. E. (2003). Corporate effects and dynamic managerial capabilities. Strategic Management Journal, 24, 1011–1025.Google Scholar
  2. Agarwal, R., & Helfat, C. E. (2009). Strategic renewal of organizations. Organization Science, 20(2), 281–293.Google Scholar
  3. Aguilera, R. V., & Cuervo-Cazurra, A. (2004). Codes of good governance worldwide: What is the trigger? Organization Studies, 25(3), 415–443.Google Scholar
  4. Augier, M., & Teece, D. J. (2008). Strategy as evolution with design: The foundations of dynamic capabilities and the role of managers in the economic system. Organization Studies, 29(8–9), 1187–1208.Google Scholar
  5. Augier, M., & Teece, D. J. (2009). Dynamic capabilities and the role of managers in business strategy and economic performance. Organization Studies, 20(2), 410–421.Google Scholar
  6. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.Google Scholar
  7. Beck, J. B., & Wiersema, M. F. (2013). Executive decision making: Linking dynamic managerial capabilities to the resource portfolio and strategic outcomes. Journal of Leadership & Organizational Studies, 20(4), 408–419.Google Scholar
  8. Becker, G. (1962). Investment in human capital: A theoretical analysis. The Journal of Political Economy, 70(5), 9–49.Google Scholar
  9. Becker, G. S. (1964). Human capital: A theoretical and empirical analysis, with special reference to education. New York: National Bureau of Economic Research.Google Scholar
  10. Bendig, D., Strese, S., Flatten, T. C., da Costa, M. E. S., & Brettel, M. (2018). On micro-foundations of dynamic capabilities: A multi-level perspective based on CEO personality and knowledge-based capital. Long Range Planning, 51(6), 797–814.Google Scholar
  11. Bensinger, G., & Nicas, J. (2016). Alphabet executive David Drummond leaves Uber board. The Wall Street Journal. NYC.Google Scholar
  12. Buyl, T., Boone, C., & Matthyssens, P. (2011). Upper echelons research and managerial cognition. Strategic Organization, 9(3), 240–246.Google Scholar
  13. Carpenter, M. A. (2000). The Price of change: The role of CEO compensation in strategic variation and deviation from industry strategy norms. Journal of Management, 26(6), 1179–1198.Google Scholar
  14. Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. M. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778.Google Scholar
  15. Castanias, R. P., & Helfat, C. E. (1991). Managerial resources and rents. Journal of Management, 17(1), 155–171.Google Scholar
  16. Castanias, R. P., & Helfat, C. E. (2001). The managerial rents model: Theory and empirical analysis. Journal of Management, 27, 661–678.Google Scholar
  17. Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate governance: Decades of dialogue and data. The Academy of Management Review, 8(3), 371–382.Google Scholar
  18. Danneels, E. (2015). Survey measures of first- and second-order competences. Strategic Management Journal, 37(10), 2174–2188.Google Scholar
  19. Eggers, J. P., & Kaplan, S. (2013). Cognition and capabilities: A multi-level perspective. The Academy of Management Annals, 7(1), 295–340.Google Scholar
  20. Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21, 1105–1121.Google Scholar
  21. EU. (2003). Micro-, small- and medium-sized enterprises: Definition and scope. In EU (Ed.), EUR-Lexn26026.Google Scholar
  22. Finkelstein, S., Hambrick, D. C., & Cannella, A. A. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards. Oxford: Oxford University Press.Google Scholar
  23. Finkelstein, S., & Mooney, A. C. (2003). Not the usual suspects: How to use board process to make boards better. Academy of Management Perspective, 17(2), 101–113.Google Scholar
  24. Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance; Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489–505.Google Scholar
  25. Gabrielsson, J., & Winlund, H. (2000). Boards of directors in small and medium-sized industrial firms: Examining the effects of the board’s working style on board task performance. Entrepreneurship & Regional Development, 12, 311–330.Google Scholar
  26. Golden, B. R., & Zajac, E. J. (2001). When will boards influence strategy? Inclination × power = strategic change. Strategic Management Journal, 22(12), 1087–1111.Google Scholar
  27. Goodstein, J., Gautam, K., & Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic Management Journal, 15, 241–250.Google Scholar
  28. Gulati, R. (1995). Does familiarity breed trust? The implications of repeated ties for contractual choice in alliances. Journal of Management, 38(1), 85–112.Google Scholar
  29. Hair, J. F., Anderson, R., Tatham, R. L., & Black, W. C. (2006). Multivariate data analysis. Upper Saddle River, NJ: Prentice Hall.Google Scholar
  30. Hambrick, D. C. (2005). Upper echelons theory: An update. Academy of Management Journal, 32(2), 334–343.Google Scholar
  31. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Journal, 9(2), 193–206.Google Scholar
  32. Hambrick, D. C., Werder, A. V., & Zajac, E. J. (2008). New directions in corporate governance research. Organization Science, 19(3), 381–385.Google Scholar
  33. Haynes, K. T., & Hillman, A. J. (2010). The effect of board capital and CEO power on strategic change. Strategic Management Journal, 31, 1145–1163.Google Scholar
  34. Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., et al. (2009). Dynamic capabilities: Understanding strategic change in organizations. New York: Wiley.Google Scholar
  35. Helfat, C. E., & Martin, J. A. (2014). Dynamic managerial capabilities: Review and assessment of managerial impact on strategic change. Journal of Management, 41(5), 1281–1312.Google Scholar
  36. Helfat, C. E., & Martin, J. A. (2015). Dynamic managerial capabilities: A perspective on the relationship between managers, creativity, and innovation. In C. E. Shalley, M. A. Hitt, & J. Zhou (Eds.), The Oxford handbook of creativity, innovation, and entrepreneurship (p. 421). Oxford: Oxford University Press.Google Scholar
  37. Helfat, C. E., & Peteraf, M. (2009). Understanding dynamic capabilities: Progress along a developmental path. Strategic Organization, 7(1), 91–102.Google Scholar
  38. Helfat, C. E., & Peteraf, M. A. (2015). Managerial cognitive capabilities and the microfoundations of dynamic capabilities. Strategic Management Journal, 36(6), 831–850.Google Scholar
  39. Hendry, K., & Kiel, G. (2004). The role of the board in firm strategy: Integrating agency and organisational control perspectives. Corporate Governance: An International Review, 12(4), 500–520.Google Scholar
  40. Herrmann, P., & Nadkarni, S. (2014). Managing strategic change: The duality of CEO personality. Strategic Management Journal, 35(9), 1318–1342.Google Scholar
  41. Huse, M. (2005). Accountability and creating accountability: A framework for exploring behavioural perspectives of corporate governance. British Journal of Management, 16(s1), S65–S79.Google Scholar
  42. Huse, M. (2007). Boards, governance and value creation: The human side of corporate governance. Cambridge: Cambridge University Press.Google Scholar
  43. Huse, M., & Rindova, V. (2001). Stakeholders’ expectations of board roles: The case of subsidiary boards. Journal of Management and Governance, 5, 153–178.Google Scholar
  44. Jensen, M., & Zajac, E. J. (2004). Corporate elites and corporate strategy: How demographic preferences and structural position shape the scope of the firm. Strategic Management Journal, 25(6), 507–524.Google Scholar
  45. Johnson, S. G., Schnatterly, K., & Hill, A. D. (2013). Board composition beyond independence: Social capital, human capital, and demographics. Journal of Management, 39(1), 232–262.Google Scholar
  46. Khanna, P., Jones, C. D., & Boivie, S. (2014). Director human capital, information processing demands, and board effectiveness. Journal of Management, 40(2), 557–585.Google Scholar
  47. Kor, Y. Y., & Mesko, A. (2013). Dynamic managerial capabilities: Configuration and orchestration of top executives’ capabilities and the firm’s dominant logic. Strategic Management Journal, 34(2), 233–244.Google Scholar
  48. Kor, Y. Y., & Misangyi, V. F. (2008). Outside directors’ industry-specific experience and firms’ liability of newness. Strategic Management Journal, 29(12), 1345–1355.Google Scholar
  49. Kor, Y. Y., & Sundaramurthy, C. (2008). Experience-based human capital and social capital of outside directors. Journal of Management, 35(4), 981–1006.Google Scholar
  50. Lin, Y., & Wu, L.-Y. (2014). Exploring the role of dynamic capabilities in firm performance under the resource-based view framework. Journal of Business Research, 67(3), 407–413.Google Scholar
  51. MacKinnon, D. P., Lockwood, C. M., Hoffman, J. M., West, S. G., & Sheets, V. (2002). A comparison of methods to test mediation and other intervening variable effects. Psychological Methods, 7(1), 83–104.Google Scholar
  52. Martin, J. A. (2011). Dynamic managerial capabilities and the multibusiness team: The role of episodic teams in executive leadership groups. Organization Science, 22(1), 118–140.Google Scholar
  53. McNulty, T., & Pettigrew, A. (1999). Strategists on the board. Organization Studies, 20(1), 47–74.Google Scholar
  54. Minichilli, A., Gabrielsson, J., & Huse, M. (2007). Board evaluations: Making a fit between the purpose and the system. Corporate Governance: An International Review, 15(4), 609–622.Google Scholar
  55. Minichilli, A., & Hansen, C. (2007). The board advisory tasks in small firms and the event of crises. Journal of Management and Governance, 11(1), 5–22.Google Scholar
  56. Minichilli, A., Zattoni, A., Nielsen, S., & Huse, M. (2012). Board task performance: An exploration of micro- and macro-level determinants of board effectiveness. Journal of Organisational Behaviour, 33(2), 193–215.Google Scholar
  57. Minichilli, A., Zattoni, A., & Zona, F. (2009). Making boards effective: An empirical examination of board task performance. British Journal of Management, 20(1), 55–74.Google Scholar
  58. Mueller, G. C., & Barker, V. L. (1997). Upper echelons and board characteristics of turnaround and nonturnaround declining firms. Journal of Business Research, 39, 119–134.Google Scholar
  59. Oxelheim, L., & Randøy, T. (2003). The impact of foreign board membership on firm value. Journal of Banking & Finance, 27(12), 2369–2392.Google Scholar
  60. Pearce, J. A., & Zahra, S. A. (1991). The relative power of CEOs and boards of directors: Associations with corporate performance. Strategic Management Journal, 12(2), 135–153.Google Scholar
  61. Peng, Y.-S., & Fang, C.-P. (2010). Acquisition experience, board characteristics, and acquisition behavior. Journal of Business Research, 63(5), 502–509.Google Scholar
  62. Peteraf, M., Di Stefano, G., & Verona, G. (2013). The elephant in the room of dynamic capabilities: Bringing two diverging conversations together. Strategic Management Journal, 34(12), 1389–1410.Google Scholar
  63. Posner, M., & Petersen, S. (1990). The attention system of the human brain. Annual Review of Neuroscience, 13, 25–42.Google Scholar
  64. Preacher, K. J., & Hayes, A. F. (2008). Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behavior Research Methods, 40(3), 879–891.Google Scholar
  65. 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. Corporate Governance: An International Review, 17(3), 292–306.Google Scholar
  66. Rasmussen, J. L., & Huse, M. (2011). Corporate governance in Norway: Women and employee-elected board members. In C. A. Mallin (Ed.), Handbook on international corporate governance (pp. 121–146). Cheltenham: Edward Elgar Publishing Limited.Google Scholar
  67. Seierstad, C., & Opsahl, T. (2011). For the few not the many? The effects of affirmative action on presence, prominence, and social capital of women directors in Norway. Scandinavian Journal of Management, 27(1), 44–54.Google Scholar
  68. Sellevoll, T., Huse, M., & Hansen, C. (2007). The value creating board. Results from the “follow-up surveys” 2005/2006 in Norwegian firms. Oslo: Norwegian School of Management.Google Scholar
  69. Shen, W., & Gentry, R. J. (2012). A cyclical view of the relationship between corporate governance and strategic management. Journal of Management and Governance, 18(4), 959–973.Google Scholar
  70. Sirmon, D. G., Hitt, M. A., & Ireland, R. D. (2007). Managing firm resources in dynamic environments to create value: Looking inside the black box. Academy of Management Review, 32(1), 273–292.Google Scholar
  71. Spring, T. (2015). Cisco’s Chambers: ‘Disrupt yourself, or be disrupted’ CRN.Google Scholar
  72. Stiles, P. (2001). The impact of the board on strategy: An empirical examination. Journal of Management Studies, 38(5), 627–650.Google Scholar
  73. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350.Google Scholar
  74. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533.Google Scholar
  75. Tian, J. J., Haleblian, J. J., & Rajagopalan, N. (2011). The effects of board human and social capital on investor reactions to new CEO selection. Strategic Management Journal, 32(7), 731–747.Google Scholar
  76. van Ees, H., van der Laan, G., & Postma, T. J. B. M. (2008). Effective board behavior in the Netherlands. European Management Journal, 26(2), 84–93.Google Scholar
  77. Walters, B. A., Kroll, M., & Wright, P. (2008). CEO ownership and effective boards: Impacts on firm outcomes. Strategic Organization, 6(3), 259–283.Google Scholar
  78. Westphal, J. D., & Fredrickson, J. W. (2001). Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy. Strategic Management Journal, 22(12), 1113–1137.Google Scholar
  79. Wincent, J., Anokhin, S., & Örtqvist, D. (2010). Does network board capital matter? A study of innovative performance in strategic SME networks. Journal of Business Research, 63(3), 265–275.Google Scholar
  80. Yamak, S., Nielsen, S., & Escriba-Esteve, A. (2013). The role of external environment in upper echelons theory: A review of existing literature and future research directions. Group and Organization Management, 39(1), 69–109.Google Scholar
  81. Zahra, S. (1990). Increasing the board’s involvement in strategy. Long Range Planning, 23(6), 109–117.Google Scholar
  82. Zahra, S. A., & Filatotchev, I. (2004). Governance of the entrepreneurial threshold firm: A knowledge-based perspective. Journal of Management studies, 41(5), 885–897.Google Scholar
  83. Zahra, S., Neubaum, D., & Huse, M. (2000). Entrepreneurship in medium-size companies: Exploring the effects of ownership and governance systems. Journal of Management, 26(5), 947–976.Google Scholar
  84. Zattoni, A., Gnan, L., & Huse, M. (2015). Does family involvement influence firm performance? Exploring the mediating effects of board processes and tasks. Journal of Management, 41(4), 1214–1243.Google Scholar
  85. Zhang, P. (2010). Board information and strategic tasks performance. Corporate Governance: An International Review, 18(5), 473–487.Google Scholar
  86. Zhang, P. (2011). Power and trust in board–CEO relationships. Journal of Management and Governance, 17(3), 745–765.Google Scholar
  87. Zona, F., & Zattoni, A. (2007). Beyond the black box of demography: Board processes and task effectiveness within Italian firms. Corporate Governance: An International Review, 15(5), 852–864.Google Scholar
  88. Zott, C. (2003). Dynamic capabilities and the emergence of intraindustry differential firm performance: Insights from a simulation study. Strategic Management Journal, 24(2), 97–125.Google Scholar
  89. Zúñiga-Vicente, J. Á., de la Fuente-Sabaté, J. M., & Suárez-González, I. (2005). Facilitating and inhibiting factors behind strategic change: Evidence in the Spanish private banking industry, 1983–1997. Scandinavian Journal of Management, 21(3), 235–265.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Business, Strategy and Political SciencesUniversity of South-Eastern NorwayDrammenNorway
  2. 2.INSEEC U. Research CenterInternational University of MonacoFontvieilleMonaco

Personalised recommendations