When will boards influence strategy? Inclination × power = strategic change

Brian R. Golden*, Edward J. Zajac

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

353 Scopus citations

Abstract

While boards of directors are usually recognized as having the potential to affect strategic change in organizations, there is considerable debate as to whether such potential is typically realized. We seek to reconcile the debate on whether boards are typically passive vs. active players in the strategy realm by developing a model that specifies when boards are likely to influence organizational strategy and whether such an influence is likely to impel vs. impede change. Specifically, we develop arguments as to when certain demographic and processual features of boards imply a greater inclination for strategic change, when these features imply a greater preference for the status quo, and how differences in such inclinations will influence strategic change. We then also propose that a board's inclination for strategic change interacts with a board's power to affect change, generating a multiplicative effect on strategic change. These ideas are tested using survey and archival data from a national sample of over 3000 hospitals. The supportive findings suggest that strategic change is significantly affected by board demography and board processes, and that these governance effects manifest themselves most strongly in situations where boards are more powerful. We discuss these findings in terms of their relevance for theories of demography, agency, and power. Copyrighi

Original languageEnglish (US)
Pages (from-to)1087-1111
Number of pages25
JournalStrategic Management Journal
Volume22
Issue number12
DOIs
StatePublished - Dec 2001

Keywords

  • Board of directors
  • Corporate governance
  • Strategic change

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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