Board Capability; An Interactions Perspective on Boards of Directors and Firm Performance

Abstract

Multitheoretic board research and research on board processes have, to date, been pursued in isolation. I argue that board interactions can serve as the conceptual basis for a combination of these two approaches to board research. I argue that board composition and board structure merely endow the board with a certain potential to contribute to firm performance but do not ensure that this potential actually comes to bear. Based on the insights from social psychology and group research, I propose board interactions as an enabling factor that allows boards to realize their problem-solving potential and to thus contribute to the firm's performance. Based on this theoretical argument, I suggest that boards with adequate configurations of composition, structure, and interactions can build "board capability" that would enhance the firm's competitive advantage.

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