Institutional and Strategic Choice Perspectives on Board Involvement in the Strategic Decision Process

The level of a board of director's involvement in strategic decisions can be viewed as an institutional response or as a strategic adaptation to external pressures for greater board involvement. We examined the antecedents and effects of board involvement from both the institutional and strategic choice perspectives. Data obtained from personal interviews with 114 board members and archival records indicated the board size, levels of diversification, and insider representation were negatively related to board involvement, and organizational age was positively related to it. Furthermore, we found board involvement to be positively related to financial performance, after controlling for industry and size effects. Overall, the results suggest that both theoretical perspectives are necessary for a comprehensive description of the strategic role of the board