The Strategic Fit Between Board of Directors Characteristics and the External Environment, and its Effect on Firm Reputation

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2012-05

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Abstract

This study integrates upper echelons and contingency perspectives in examining the effects of boards of directors on firm reputation. First, using upper echelons theory, I derive hypotheses about how the human and social capital, and the demographic characteristics of the board affect corporate reputation. Second, I examine how fit with an ideal profile of board characteristics -- including board expertise, board social capital, and board demographic diversity -- impacts firm reputation. Finally, using a contingency perspective, I look at how the importance of fit with the ideal profile varies across different environmental characteristics. My results indicate that board-level expertise, social capital, and gender diversity have positive effects on firm reputation. Moreover, misalignment from the ideal board profile based on these three characteristics has a negative effect on firm reputation, and this effect is stronger for firms operating in industries with high need for legitimacy. This study seeks to contribute to strategy research and practice by proposing that corporate governance research and managerial practice can benefit from a perspective that considers a more nuanced picture of the board of directors.

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Keywords

Board of directors, Firm reputation, Board human capital, Board social capital, Board demographic diversity

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