Board Capital, Board Structure, and Organizational Learning: A Cross-National Analysis

Abstract

In this study we view directors as active participants in strategy making and examine the effect of board capital diversity on organizational learning orientation (exploration versus exploitation). We argue that the influence of board capital on organizational learning orientation is contingent on how different governance models facilitate integration of director’s knowledge resources in strategy-making. We propose a contingency model by highlighting the influence of different cross-national board structures on the relation between board capital and organizational learning. Drawing on the distinction between the Anglo-Saxon (one-tier) and Rhineland (two-tier) model in the UK and Germany respectively, we test hypotheses on a panel of firms in the pharmaceutical industry from 2005-2009. Our pattern of findings suggests that though board capital diversity matters generally for firm-level organizational learning orientation, the crux for harnessing the value of board capital for different learning orientations may rest in how country-specific board structures enable or constrains the actual realization of value out of board capital. We discuss implications for theory and practice.