DIRECTOR STRATEGIC CONTRIBUTION AND ORGANIZATIONAL PERFORMANCE IN ENTREPRENEURIAL FIRMS.

Abstract

The influence of boards of directors on firm performance has been widely studied, and boards have been found to influence a variety of firm outcomes. Most research examining the effects of boards of directors on firm performance has been concerned with board composition issues in large firms. In those studies, board size, the existence of outsiders, and the proportion of outsiders on the board were frequently hypothesized to be predictors of firm performance. In studies of entrepreneurial firms, board size and board composition have also been viewed as predictors of firm performance. Two critical areas of governance minimally addressed by existing studies of either large or entrepreneurial firms are first, the role of boards of directors in private firms, and second, the strategic contribution of board members. Our research fills this gap by examining director strategic contribution in a sample of private, entrepreneurial firms. Our results suggest that the extent to which outside board members perform their strategy role has a significant, positive influence on firm performance. Insider contribution had no effect. We also found that both firm size and firm age are moderators of the relationship between board strategic contribution and firm performance. Specifically, we found that a board's strategic contribution has a more profound (and positive) influence on the performance of younger and smaller firms.