The Strategic Context Of External Network Ties: Examining The Impact Of Director Appointments On Board Involvement In Strategic Decision Making

Prior research has given little consideration to external determinants of knowledge and perspective that may affect directors' ability to contribute to the strategic decision making process. We introduce a framework on board involvement in which the potential for directors to contribute to firm governance and strategic decision making (i.e., in the form of monitoring and advising top management) is critically influenced by (1) whether they hold appointments to other firms with more or less-related product, corporate, and international strategies, and (2) whether such a portfolio of board appointments is suited to the degree of environmental instability surrounding the focal firm. Hypotheses are tested with a comprehensive data set that combines archival reports with behavioral data obtained through surveys of Forbes 1000 directors and CEOs. The findings suggest that while the simple number of director appointments to other boards does not influence board involvement, appointments that have the potential to provide directors with relevant strategic knowledge and perspective do enhance the board's ability to contribute to the strategic decision making process. Support for the theoretical framework presented in this study helps answer recent calls for board research that examines the "substantive context" of board appointments, and moves our understanding beyond the number of such appointments or director independence as predictors of board decision making. The findings also show the potential power of models that link the broader, social-structural context in which boards are embedded, as well as the environmental conditions that surround them, with micro-behavioral processes that occur inside the "black box" of corporate boards.