Firm Complexity and Board of Director Composition

Details

Serval ID
serval:BIB_1EE93AE20A61
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Firm Complexity and Board of Director Composition
Journal
Corporate Governance: An International Review
Author(s)
Markarian Garen, Parbonetti Antonio
ISSN
0964-8410
Publication state
Published
Issued date
12/12/2007
Volume
15
Number
6
Pages
1224-1243
Language
english
Abstract
This paper examines the relationship between firm complexity and board of director composition. Utilising the board typology of Baysinger and Zardkoohi (1986), we classify board members either as insiders, business experts, support specialists, or community influentials, and examine board composition in relation to firm internal and external complexity. Internal complexity refers to the sophistication of internal work processes (proxied by firm R&D expenditures, and the amount of invested capital), while external complexity relates to the external competitive structure (proxied by the number of business and geographic segments, and industrial leadership). Utilising a random sample of 150 firms drawn from six industries over the 2003–2005 time period, and after classifying 4,408 directors to one of our board categories, multivariate results confirm conjectures that complexity is related to the specific capabilities that each board member brings to the firm. We find that externally complex firms substitute community influentials for insiders. Additionally, internally complex firms have lower levels of community influentials, which are substituted by insiders and support specialists. This study adds to a small but growing literature that examines the economic determinants of board structure (Boone et al., 2007; Coles et al., 2005; Gillan et al., 2003; Linck et al., 2005), by providing a unique lens in examining board characteristics that goes beyond the traditional insider/independent classification.
Keywords
Management of Technology and Innovation, Strategy and Management, General Business, Management and Accounting
Web of science
Create date
05/05/2021 9:04
Last modification date
06/05/2021 5:35
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