Job-related diversity: the comprehensiveness and speed of board decision-making processes—an upper echelons approach

Document Type

Article

Publication Date

6-1-2018

Abstract

Strategic decision-making processes influence firm-level outcomes. Using the theory of upper echelons, this study investigates how diversity in directors’ skills, knowledge, and industry experience influence board decision-making processes that may impact overall strategic decision-making processes. Such diversity has been commonly accepted to be a ‘double-edged sword’—enhancing comprehensiveness but hindering the speed of decision-making. On the contrary, we used an existing large survey database to show that directors’ diverse educational background, functional background, and industry experience (job-related diversity) have a positive effect on comprehensiveness as well as the speed of board decision-making. In addition, our results indicate that board processes (directors’ use of their knowledge and skills) play an important role by transmitting the positive effects of diversity. The study is in a tradition of exploring how boards may influence firms’ strategic decision-making processes. Our findings provide additional arguments for adding job-related diversity to boards of directors.

Publication Title

Journal of Management and Governance

Volume

22

Issue

2

First Page

427

Last Page

456

Digital Object Identifier (DOI)

10.1007/s10997-017-9394-4

ISSN

13853457

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