Pilot, Pivot and Advisory Boards: The Role of Governance Configurations in Innovation Commitment

Abstract

This study examines how governance configurations comprised of board capital, CEO power and the presence of large shareholders are associated with innovation commitment in organizations. We take a configurational perspective, proposing that organizational innovation commitment is contingent upon how interdependent governance attributes associated with monitoring and resource provisioning can either enhance or constrain management’s discretion to invest in research and development (R&D). Using fuzzy-set qualitative comparative analysis (fsQCA), we identify complementarities which lead to three board archetypes that foster firm innovation commitment. ‘Pilot boards’ have both board capital breadth and depth allowing for active and close participation in innovation decision-making. ‘Pivot boards’ possess the depth of industry-specific expertise and linkages required for providing resources and oversight of powerful CEOs. And ‘advisory boards’ have less power but have outside directors who have breadth of expertise and relational capital that complements the oversight provided by powerful family owners so as to effectively advise management on innovation decisions. Our findings underscore that governance mechanisms work in tandem, not in isolation, to explain significant organizational outcomes, specifically those associated with innovation commitment.

Bringing owners back on board: A review of the role of ownership type in board governance

“…Moreover, more recent studies apply social identity theory to understand the differences between family owners and lone founders (Cannella et al, 2015; Miller et al, 2011); however, it can also be used to uncover the motives and behaviors of other types of owners. Furthermore, the shift toward using a configurational approach to study the joint influence of different board governance features suggests a prospective configurational theorizing (e.g., Federo & Saz‐Carranza, 2018; Schiehll, Lewellyn, & Muller‐Kahle, 2018) to understand how the bundles of ownership types could reflect particular board configurations that are likely to influence firm outcomes.…”

The use of nonfinancial performance measures in CEO bonus compensation

“…Power is defined as "the capacity of individual actors to exert their will" and to achieve their goals in a particular relationship (Finkelstein, 1992;Hambrick & Fukutomi, 1991;Pfeffer, 1981;Schiehll et al, 2018). However, power is a relative concept and depends on other organizational actors (Hambrick & Fukutomi, 1991;Pfeffer, 1981;Schiehll et al, 2018;Shen & Cannella, 2002).…”

“…Power is defined as "the capacity of individual actors to exert their will" and to achieve their goals in a particular relationship (Finkelstein, 1992;Hambrick & Fukutomi, 1991;Pfeffer, 1981;Schiehll et al, 2018). However, power is a relative concept and depends on other organizational actors (Hambrick & Fukutomi, 1991;Pfeffer, 1981;Schiehll et al, 2018;Shen & Cannella, 2002). Both agency theory and managerial power theory suggest that effective board monitoring attenuates the influence of powerful CEOs on incentive contracts (Bebchuk & Fried, 2004;Daily & Johnson, 1997;Jensen & Meckling, 1976;van Essen et al, 2015).…”

“…CEO power is a relative concept based on the relationship between the CEO and other board members (Schiehll, Lewellyn, & Muller-Kahle, 2018). Therefore, we examine the moderating role of the compensation committee in the choice of nonfinancial performance measures.…”

CEO Advice Seeking: An Integrative Framework and Future Research Agenda

“…Depending on their education, industry and functional expertise, and governance expertise based on their past or current board appointments, directors possess different human and social capital (Bacon-Gerasymenko & Eggers, 2019; Kor & Sundaramurthy, 2009; Kroll et al, 2008; Sundaramurthy et al, 2014). Such capital equips the board with the requisite expertise and access to information networks in advising the CEO on strategic decisions (Carpenter & Westphal, 2001; Schiehll, Lewellyn, & Muller-Kahle, 2018; Stewart, 1991).…”