Toward a knowledge‐based view of the board: Modeling board intrafirm knowledge networks

Abstract

AbstractThis study introduces a conceptualization of board of directors' intrafirm knowledge network and a methodology for its construction, assessment, and analysis. We use network theory and analytical techniques to construct boards of directors' intrafirm knowledge networks based on directors' functional domain and committee affiliations. We demonstrate the utility of this approach for governance research by examining the intrafirm knowledge network of the board of directors of General Electric and offer testable propositions that link key director turnover with the properties of and the structural changes in the board's knowledge network and the firm outcomes of strategic change and innovativeness. Our approach bridges the human and social capital perspectives on boards of directors by considering the mechanisms through which turnover of key directors influences firm‐level outcomes. Directors are increasingly expected to not only fulfill their monitoring responsibilities but also provide firms with resources and service (e.g., involvement in strategy‐making). The enactment of these responsibilities is contingent on the effective collaboration within board intrafirm networks. Our conceptualization of intrafirm board ties as a knowledge network can help practitioners identify key directors, analyze the implications of director turnover, and develop succession plans. We make important contributions to corporate governance research and offer insights into understanding the knowledge dynamics in small team‐like settings, such as boards of directors and their impact on firm strategy and innovativeness.