New member in the boardroom and subsequent strategic change in the product-market scope of the firm

Abstract

Purpose The purpose of this paper is to explore the linkages between the appointment of a new management board member and the following strategic change (SC) in the product-market scope of the firm. Design/methodology/approach The study is based on the whole population of Estonian firms, in total 16,941 observations and the data are retrieved from Estonian Business Register. First, the authors focus on the association between the appointment of a new board member and the likelihood of different types of SC. Second, the authors focus on the association between the new board member’s previous export experience and export-related SC. Logistic regressions are applied for all models. Findings The results indicate that there is a significant association between the appointment of a new board member and the subsequent start of exports and also continuing it, entrance into a new industry and making an SC in more broad terms, though the significance levels vary across the composed models. No significant relationship was found with the entrance into the additional geographic market(s) for already exporting firms. There was also a significant association between the previous export experience of a new board member and the subsequent start of exporting. Originality/value The authors look at SC in the product-market domain holistically by applying the same data on both geographic and product portfolio expansion options. The authors also introduce the scale and stability contexts of SCs. These aspects are usually neglected from similar studies.

The impact of foreign directors and firm performance on strategic change

“…As discussed in this research, their impact on board outcomes are significant and positive. This finding supports the general notion in the literature that a change in the boardroom of a firm might be helpful in redirecting the course of a firm (Süsi and Lukason, 2020). Therefore, this study supports the proposition that diversity is a useful tool in offering a greater variety in terms of ideas, perspectives and information, which, therefore, improves the firm’s capacity to make more effective and informed decisions.…”

“…According to the upper echelons model, a firm’s top management plays a key role in shaping an organization’s strategic direction (Hambrick and Mason, 1984). Previous research has explored the relationship between various other board characteristics and strategic change, including board size, heterogeneity, succession, and diversity ((Padilla-Angulo, 2020) board capital (Haynes and Hillman, 2010), board gender diversity (Sidhu et al , 2021) board industry experience (Oehmichen et al , 2017) and new member in the board roam (Süsi, and Lukason, 2020). The current paper adds to this body of work by providing evidence that FDs might be considered a further contributing factor to strategic change.…”

Political Connectedness and Financial Performance of SMEs

“…Characteristic for SMEs, members had long tenures on boards, especially when comparing firm age and average time on the board. The infrequent changes in the boards of Estonian SMEs have been noted in earlier studies as well (see, e.g., Süsi and Lukason 2021). The correlation matrix provided in Appendix A Table A5 does not indicate any multicollinearity issues between the independent and control variables.…”

How Does Managerial Experience Predict the Internationalization Type of a Young Firm?

“…Still, from the respective variables, the diversity of past experience is of the highest importance. This variable reflects the potential of a manager to build up a large and diversified product-market portfolio, as already proven on the example of old firms (see, e.g., [33]). Still, focusing on too many firms in the past seems to portray a manager to whom internationalization is not important.…”

“…Thus, without managers' prior experience, firms would try less actively to enter distant markets as those tend to be culturally more different from their home market [31]. In addition to bringing their prior knowledge into the young firm [32], [33], these key decision-makers "decide when, where and how to enter foreign markets" [34, p. 60]. Thus, it is important to find out to what extent their previous experience helps young firms to internationalize early and rapidly.…”