Long Range Planning: Patricia Gabaldon, Sadi Bo Gaç Kanadlı, Max Bankewitz

Long Range Planning xxx (2018) 1e16
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Long Range Planning

journal homepage: http://www.elsevier.com/locate/lrp
How does job-related diversity affect boards' strategic

participation? An information-processing approach
Patricia Gabaldon a, *, Sadi Bog
âç Kanadlı b, Max Bankewitz c
a
Department of Economics, IE Business School, IE University, C/ María de Molina, 13, 28006 Madrid, Spain
b
Universitat Ramon Llull e ESADE, Av. Torreblanca, 59, E-08172 Sant Cugat, Barcelona, Spain
c
Witten/Herdecke University, Alfred-Herrhausen-Straße 50, 58448 Witten, Germany
a r t i c l e i n f o a b s t r a c t
Article history: More than ever, corporate leaders consider the presence of different skills, knowledge, and
Available online xxx experience in their boardrooms being important for boards' involvement throughout the
whole strategy process. However, even though of great practical relevance, we have
Keywords: limited knowledge about how such diversity affects boards' active contribution to
Board strategic participation corporate strategy. Applying information-processing theory, we explore how job-related
Board processes
diversity may be an important determinant for boards' strategic participation. Using a
Job-related diversity
survey database collected in Norway, we find that job-related diversity contributes to
Information-processing theory
boards' strategic participation through directors' use of knowledge and skills.
© 2018 Elsevier Ltd. All rights reserved.
Introduction
Board diversity in forms of directors' background and professional experience has become a fundamental issue for
corporate leaders. In an interview with Fortune magazine, Macy's CEO and Chairman Terry Lundgren said: “We talk a lot
about diversity, but the first criteria are that each and every board member has a unique skill set and experience that they can
bring to the board” (Fairchild, 2015). Such variety in directors' knowledge, skills, and professional experience is termed as job-
related diversity (Harrison and Klein, 2007) which is commonly assumed to be a reflection of directors' educational back-
ground, functional background and industry experience (e.g. Forbes and Milliken, 1999; Kanadlı et al., 2017a; Torchia et al.,
2015). Corporate leaders' interest in building boards, characterized with job-related diversity, is not surprising since they
expect their boards to get involved, together with top management teams, in strategic decision-making (Bailey and Peck,
2013; Finkelstein and Mooney, 2003). The logic is that board job-related diversity would enrich the pool of relevant infor-
mation and increase the number of different perspectives which would enhance the comprehensiveness of strategic decision-
making processes (Kanadlı et al., 2017a). In turn, this would lead to the generation of decision outcomes with better quality as
well as creativity (Miller and Triana, 2009; Rindova, 1999).
However, theory (Forbes and Milliken, 1999) and research emphasize that board diversity's effects on decision outcomes
may not be straightforward (e.g. Milliken and Martins, 1996; Singh and Point, 2004; Zhang, 2010). Directors, may refrain from
sharing unique information and communicating different perspectives (Zhang, 2010) and even if they are willing to do so,
they may face several obstacles in the boardrooms to this end (Golden and Zajac, 2001; Haynes and Hillman, 2010; Kanadlı
et al., 2017a; Triana et al., 2013; Westphal and Milton, 2000). Board diversity may even impede boardroom dynamics which, in
* Corresponding author.
E-mail addresses: patricia.gabaldon@ie.edu (P. Gabaldon), sadi.kanadli@alumni.esade.edu (S.B. Kanadlı), max.bankewitz@uni-wh.de (M. Bankewitz).
https://doi.org/10.1016/j.lrp.2018.02.005
0024-6301/© 2018 Elsevier Ltd. All rights reserved.
Please cite this article in press as: Gabaldon, P., et al., How does job-related diversity affect boards' strategic participation? An
information-processing approach, Long Range Planning (2018), https://doi.org/10.1016/j.lrp.2018.02.005
2 P. Gabaldon et al. / Long Range Planning xxx (2018) 1e16
turn, may lead to negative effects of diversity on strategic decision-making (Shore et al., 2009) as well as critical board de-
cisions (Zhu, 2013, 2014).
Few studies investigate the link between job-related diversity to specific strategic decisions (e.g. Golden and Zajac, 2001;
Haynes and Hillman, 2010), speed and comprehensiveness of board decision making processes (Kanadlı et al., 2017a),
innovation (Kristinsson et al., 2016) or linking demographic heterogeneity, including gender and job-related diversity forms,
to specific board decisions such as CEO compensation (e.g. Quintana-Garcia and Benavides-Velasco, 2016; Zhu, 2014, 2013). In
addition, the few studies examining how certain aspects of job-related diversity (functional background) impact board task
performance, indicate a negative association (Minichilli et al., 2009). Despite the research interest in job-related diversity
(Adams et al., 2015; Hillman, 2015) and corporate leaders' ongoing goal of creating active boards, whether and how job-
related diversity may impact boards' participation and contribution to strategic decision-making has never been investigated.
The purpose of this study is to examine whether and how job-related diversity might impact boards' strategic partici-
pation. We use boards' strategic participation as a proxy to measure boards' involvement in the strategy process by engaging
in decision-making processes (Minichilli et al., 2009; Zona and Zattoni, 2007). Boards' strategic participation refers to the
involvement in the strategy process, by making decisions or suggesting proposals, or contributing to the implementation of a
chosen one (Huse, 2005). The strategic participation is clearly different from other sets of tasks, control and resource pro-
vision, which have been traditionally explained through agency and/or resource dependency perspectives (Hillman and
Dalziel, 2003; Pugliese et al., 2009; Westphal, 1999).
Therefore, to explore the relationship between job-related diversity and boards' strategic participation, we apply
information-processing theory (De Dreu et al., 2008b; Hinsz et al., 1997). Under this framework, during decision-making
processes, variety in skills, knowledge, and experience may enhance the comprehensiveness of information-processing at
the group level which would lead to decision outcomes with better quality (Amason, 1996; De Dreu and Carnevale, 2003) and
creativity (Bantel and Jackson, 1989; De Dreu et al., 2008a). However, this variety, while it is necessary, is not a sufficient
condition for the realization of such favorable results. Both information (shared and unshared) and opinions, ideas, per-
spectives should be used during group information-processing (van Knippenberg et al., 2004). Thus, through an information-
processing lens, there is a strong rationale to expect that job-related diversity may reveal its effects on boards' strategic
participation through directors' use of their knowledge and skills. Directors' use of knowledge and skills is identified as a core
board process (Forbes and Milliken, 1999).
This study contributes to diversity literature on board tasks as well as more generally to the literature on information
processing and board effectiveness. First, in contrast to previous studies that has linked specific indicators of job-related
diversity with board task performance (e.g. Minichilli et al., 2009), this study extends the growing research on job-related
diversity (Hillman, 2015) by arguing and empirically testing the effects of general indicators of job-related diversity on
boards' strategic participation. The assumption that boards are characterized by richness in directors' cognitive resources will
be equally successful in performing competent board work is unlikely to hold. The mediation effect of how directors make use
and activate their knowledge is critical to understand this effect. Therefore, we show that the value of job-related diversity, as
a group level characteristic, is limited unless it is activated at the board level.
Second, our contribution is to show how and why boards should be explored alternatively through information-processing
lenses rather than the dominant decision-making perspective (Forbes and Milliken, 1999). Our results contradict this
perspective that theoretically argues negative effects of job-related diversity on board process of use of directors' skills and
knowledge which, in turn, may impede boards' participation and contribution to strategic decision-making. Moreover, in
board context, our study is first to validate an important argument embedded in information-processing theory (van
Knippenberg et al., 2004): board processes play a vital role in the utilization of board diversity. This study also has impor-
tant implications for practice and policy. In this regard, for corporate leaders, the results of our study highlight that boards
that are actively involved in the strategy process, require the appointment of directors with different skills and experience.
However, the complementary mechanisms should be also in place to facilitate the use and sharing of such resources openly,
and freely. For policymakers, we suggest that increasing levels of job-related diversity in the boardrooms can be an important
initiative. However, positive results of this diversity on boards cannot be realized unless the different knowledge and skills of
board directors' are embraced and positively shared, and received.
Theoretical framework and hypotheses development
Boards' strategic participation
In most contexts, the board is expected to play a key function in shaping the strategy of the firm (Bailey and Peck, 2013).
Thus, boards' strategic involvement is widely recognized as one of the main responsibilities of the board (e.g. Finkelstein et al.,
1996; Finkelstein and Mooney, 2003; Golden and Zajac, 2001; McNulty and Pettigrew, 1999; Stiles, 2001; Zahra and Pearce,
1989). Different board tasks may be specified under the concept of board strategic involvement (Pugliese et al., 2009; Stiles,
2001); a complex and multidimensional concept that cannot be comprehended through a single theoretical lens (Pugliese
et al., 2009; Ravasi and Zattoni, 2006).
We argue in line with Huse (2007) that it is important to explore the antecedents of various sets of board tasks, as well as
the distinction between different sets of tasks related to board strategic involvement. However, a clear distinction between
tasks has proved difficult to define (Pugliese et al., 2009; Ravasi and Zattoni, 2006; Zhang, 2010). Although this distinction
P. Gabaldon et al. / Long Range Planning xxx (2018) 1e16 3
goes beyond the scopes of this paper, boards' strategic participation can be definitely defined as one of these sets of tasks.
Among the main sets of tasks covering boards' involvement in the strategy process, board strategic participation is clearly
different than control and resource provision tasks (Hillman and Dalziel, 2003; Westphal, 1999).
It is widely accepted that boards under most constituencies have the main responsibility to control strategic decisions
made by management (Hendry and Kiel, 2004; Hillman and Dalziel, 2003; Nielsen and Huse, 2010a, 2010b; Stiles, 2001; Zahra
and Pearce, 1989). These control tasks are rooted in agency theory and include strategy ratification and control during the
evaluation phase of a strategy process (Fama and Jensen, 1983; Stiles, 2001). From this perspective, boards' strategic
involvement may include “evaluation and proposals of different alternatives and consider different options” (Ruigrok et al.,
2006, p. 1205).
Another main way of boards' involvement in the strategy process is suggested to relate to resource provision (Hillman and
Dalziel, 2003; Abad et al., 2017). Although often named differently, as for example, strategy (Zahra, 1990; Zahra and Pearce,
1989) or service (Johnson et al., 1996), it is commonly recognized that resource provision is rooted in resource dependency
theory. It is related to directors providing advice and counsel to the management as inputs to strategy formulation (Hillman
and Dalziel, 2003). From this perspective, for example, Westphal (1999) argues that advice and counsel interactions cover
board assistance in the formulation of corporate strategy, directors' role as a “sounding board” on strategic issues, and di-
rectors' advice and counsel in discussions outside of board/committee meetings.
However, boards get involved in the strategy process together with top management teams, by engaging in decision-
making processes (Forbes and Milliken, 1999; McNulty and Pettigrew, 1999; Schmidt and Brauer, 2006). Rindova (1999)
conceptualizes this engagement as the formation of a bigger team (i.e. TMT and the board), benefiting also from directors'
information, knowledge and experience in reaching a final decision choice. We define this set of tasks as strategic partici-
pation tasks (Huse, 2005). Participation tasks include boards' involvement in the strategy process to the extent that boards
make strategic decisions, suggest strategic proposals or contribute to the implementation of a chosen strategy (Forbes and
Milliken, 1999; Minichilli et al., 2009; Zona and Zattoni, 2007).
Previous studies have traditionally examined boards' involvement in the strategy process by focusing on control and
resource provision tasks (for a review see Pugliese et al., 2009). Less attention has been given to the boards' strategic
participation. Theorizing about “how boards make decisions” from these traditions has stayed in the black box of board
behavior (Daily et al., 2003).
Thus, different than an agency perspective or resource dependency lens that has been viewed limited in explaining
“boards as strategic decision-making groups”, the set of strategic participation tasks is traditionally explained through a
cognitive perspective on board decision-making (Bailey and Peck, 2013; Forbes and Milliken, 1999; Rindova, 1999). Primary
antecedents of boards' strategic participation from this perspective are the presence of directors' knowledge and skills and the
board processes that facilitate the exchange, use, and convergence of those cognitive resources to produce a final decision
choice (Forbes and Milliken, 1999). In addition, through this lens, job-related diversity has been theoretically argued to have
important but controversial effects on board processes and thus, on boards' participation and contribution to strategy process
(Forbes and Milliken, 1999).
Complex effects of job-related diversity: an information-processing approach
Diversity is not just about salient socio-demographic differences. Diversity is composed of different types of attributes,
which are “demographic (e.g. race, gender, age, etc.), task-related knowledge and abilities; values, beliefs, and attitudes;
personality and cognitive and behavioral styles, and status in the organization” (Point and Singh, 2003, p. 751). However, in
practice heterogeneity on groups can be based on surface level and deep level diversity (Harrison et al., 1998). This classi-
fication has been also labeled as “observable” and “unobservable” diversity (Milliken and Martins, 1996). Irrespective of
different labels, diversity in skills, knowledge, and experience, job-related diversity, is commonly accepted to be the most
important diversity type, influencing complex and highly-cognitive tasks, such as decision making (Forbes and Milliken,
1999; Milliken and Martins, 1996; Rindova, 1999).
The majority of studies on diversity-board decisions have relied on decision-making model (Forbes and Milliken, 1999).
The identification and application of directors' knowledge and skills have been specified as a core board process and defined
as the use of knowledge and skills (Forbes and Milliken, 1999). Forbes and Milliken (1999) argue that job-related diversity may
be negatively related to the use of knowledge and skills. The logic behind this rests on two main arguments. First, diverse
boards are more likely to experience communication and coordination problems that may hinder boards' ability as a group to
exchange information and knowledge and communicate perspectives. Second, the presence of different perspectives during
board decision-making may lead to high levels of conflict. Consequently, diversity may lead to problems of trust and cohe-
siveness in the boardroom. In sum, due to these issues, a decision-making approach proposes that job-related diversity can be
expected to hinder the beneficial outcomes of activating directors' knowledge and skills.
Indeed, recent studies demonstrate that diversity may have detrimental effects on use of directors' knowledge and skills
during board decision-making. For example, different perspectives and information individually held, may not be represented
in board discussions due to out-group categorization which in turn may lead to intergroup biases that negatively affect
decision outcomes (e.g. Westphal and Bednar, 2005; Zhang, 2010; Zhu, 2013, 2014). However, it should be noted that different
than a decision-making perspective, these studies have applied a social categorization perspective that explains how directors
(minorities who are categorized as out-group members), enhancing level of job-related diversity, can be categorized as out-
groups and how this bias categorization impacts their use their knowledge and skills during board discussions (Kanadlı et al.,
2017b).
While theoretical arguments of decision-making perspective in terms of negative effects of job-related diversity on board
interactions has yet to be validated, several researchers have started to introduce information-processing lens as a novel
perspective to better explain board behavior (e.g. Boivie et al., 2016; Dalton and Dalton, 2011; Khanna et al., 2014; Zhang,
2010). In this study, we also use an information-processing perspective. There are two main reasons for this. The first
reason is related to the distinctive features of boards as work groups. Boards function part-time and meet episodically to deal
with complex, highly cognitive decision problems. Being held responsible for making critical decisions and being accountable
for the outcomes of those decisions, it is not unlikely that directors may take immediate and efficient actions to resolve
communication problems, or any other, in the boardroom (Mellahi, 2005). Directors' experiences also often cover commu-
nicating with several directors in multiple boards (Carpenter and Westphal, 2001) and thus, resolving communication
problems.
Second, it is hard to imagine that, in a board context, diversity of information and perspectives may lead to high levels of
conflict (Hambrick et al., 2008) and, accordingly, instead of accomplishment of various board tasks and goals during episodic
meetings, directors will consume their cognitive capacity for the resolution of conflict. Instead, it is not unlikely that board
discussions and decision-making processes are managed, keeping conflicts at moderate levels (Ravasi and Zattoni, 2006;
Zhang, 2010). A meta-analysis focusing on the effects conflict may have on group performance demonstrates that informa-
tion processing theory (IPT) may better explain such link (De Dreu and Weingart, 2003) than decision making perspective.
Therefore, in the next section, we introduce a brief overview of the information processing approach, which is applied to
better explain diversity's potential, taking board processes into account.
Information-processing theory
Because work groups are facing tasks that are increasingly intellectual and cognitive in nature, one of the primary
functions of a group is information-processing. An information-processing framework may, therefore, be applicable to various
models of cognitive tasks such as strategic decision-making (Hinsz et al., 1997).
Information-processing occurs at individual and group levels. At the individual level, information-processing produces
ideas and decisions, and judgments rest on group members' individual knowledge and skills. At the group level, individual
contributions (e.g. ideas, decisions, judgments) need to be shared and processed to produce a “coherent, feasible, sensible,
and, if needed, creative group judgment or decision, reflecting group-level information processing” (De Dreu et al., 2008b, p.
28). Group level information-processing depends thus on both the identification and application of the contributions by
group members and on the processes that combine the various individual contributions to produce group-level outcomes
(Hinsz et al., 1997). As a result, group members can develop new insights, reach a shared understanding of the tasks, resolve
differences and come up with high quality group outcomes (De Dreu and Carnevale, 2003; De Dreu et al., 2008a, 2008b; Hinsz
et al., 1997; van Knippenberg et al., 2004).
Variety in skills, knowledge, and experience can be used to nurture a group information processing space such as board
discussions and meetings, which can encourage directors to share and use new information and communicate different
perspectives for better quality/creativity outcomes. Earlier studies provide strong support for this claim (Golden and Zajac,
2001; Haynes and Hillman, 2010). Support also comes from research on top management teams' diversity (Simons et al.,
1999; Talaulicar et al., 2005). In turn, such a comprehensive process ‘is proposed to be related to group performance,
especially to group creativity, innovation, and decision quality’ (van Knippenberg et al., 2004, p. 1010) Research that supports
this view already exists (Amason, 1996; Bantel and Jackson, 1989; De Dreu, 2007; De Dreu and Carnevale, 2003).
However, job-related diversity generated by directors can be a necessary but not a sufficient condition to benefit from such
variety on strategic decision- making. Diversity within a group does not always lead to the elaboration of task-relevant in-
formation and perspectives (Brodbeck et al., 2007; Scholten et al., 2007; Zhang, 2010). Whereas some information is shared
among all group members, other information may be unshared and individually possessed (De Dreu, 2007, p. 603).
Therefore, according to the information-processing theory, the elaboration of task-related information is the main process
underlying the positive effects of diversity on quality as well as the creativity of decision outcomes. Van Knippenberg et al.
(2004, p. 1101) note that “elaboration is defined as the exchange of information and perspectives, individual-level processing
of the information and perspectives, the process of feeding back the results of this individual-level processing into the group,
and discussion and integration of its implications.” Only through deliberate and in-depth information processing, decision
groups may develop an accurate and nuanced understanding of decision problems at hand.
Job-related diversity and the boards' strategic participation
Directors are considered highly competent and reputed individuals, expert decision-makers with working knowledge in
their fields and experience in decision-making problems (Hillman et al., 2000; Rindova, 1999). Thus, directors should indi-
vidually be able to collect timely and pertinent information (Carpenter and Westphal, 2001) and then process this to generate
decisions, ideas, and perspectives related to the strategic issues at hand. Therefore, in boards characterized by job-related
diversity, individual information-processing may result in the collection of timely and relevant information on a broader
range, leading to the generation of an increased number of individual perspectives on the actual strategic issues.
Several studies support the notion that variety of directors' background and experience lead to more options considered,
e.g. alternative strategies (Golden and Zajac, 2001; Haynes and Hillman, 2010). In support of this view, Simons et al. (1999)
emphasize that the debate between TMT members -diverse in job-related ways- is likely to include a wide range of task
relevant perspectives and information. Miller et al. (1998) note that diversity in knowledge and skills enhance the
comprehensiveness and extensiveness of strategic choices.
Following above discussions, we argue that boards characterized by job-related diversity can engage in in-depth infor-
mation processing, which, in turn, can be expected to provide a thorough understanding of the actual strategic issues (Khanna
et al., 2014). Information-processing theory and research emphasize that in-depth information processing leads to decision
outcomes with better quality (De Dreu and Carnevale, 2003; Greitemeyer and Schulz-Hardt, 2003; Scholten et al., 2007; van
Knippenberg et al., 2004). Therefore, boards can be expected to be more active in strategic decision-making, influencing
strategic decisions (Miller and Triana, 2009; Sun et al., 2014; Torchia et al., 2011). Following the above discussion, we hy-
pothesize that:
H1. Job-related diversity impacts positively boards' strategic participation.
Mediation effect of use of knowledge and skills
We have argued that the potential advantage of diverse groups in experiencing in-depth information processing lies in the
greater pool of timely and relevant information and different perspectives diverse groups may have at their disposal.
However, this does not mean that these contributions will be revealed during decision-making per se. One important aspect
of in-depth information processing is the collection and processing of both shared and unshared information, expected to
lead to decision outcomes with better quality or creativity. While some information might be shared, some may be indi-
vidually possessed by group members and not be revealed during group information processing (Zhang, 2010). This infor-
mation sharing may occur when group work is “under conditions of distributed knowledge” (Brodbeck et al., 2007, p.471). The
use of shared information may only fasten decision-making but this could also result in loss of information and poor decision-
making quality (Williams and O'Reilly, 1998). By disseminating and processing unshared information, groups make decisions
of superior quality (Greitemeyer and Schulz-Hardt, 2003).
The group processes that surface information eboth shared and unshared- and different perspectives during discussions
promote in-depth information processing. In information processing theory, one such process is specified as the elaboration
of task-relevant information (van Knippenberg et al., 2004) using the identification and use of individual contributions (Hinsz
et al., 1997). Elaboration of available information benefits the depth of information processing at a group level, leading to
decision outcomes with better quality (Greitemeyer and Schulz-Hardt, 2003; Scholten et al., 2007; van Knippenberg et al.,
2004). From this perspective, positive effects of diversity on quality as well as creativity in decision outcomes that can be
realized through the elaboration of available shared and unshared information.
It should be noted that potential negative effects of diversity on the elaboration of information are also well recognized in
information processing theory. De Dreu (2007) indicates that a high level of conflict may hinder, while a moderate level of
conflict may enhance in-depth information processing. The approach is clearly different than the decision-making
perspective, although it also focuses on conflict in its rationale.
To explain the consequences of conflict on the use of knowledge and skills and on in-depth information processing
information-processing theory approach focuses on cognitive capacity limits of individuals in processing information
(O'Reilly, 1980; Tushman and Nadler, 1978). Only when high levels of task related conflict exist, individual members may fail
to use their resources for the accomplishment of the task at hand, because the resolution of conflicting issues consumes the
cognitive capacity, which can subsequently limit the individual (De Dreu and Weingart, 2003). In turn, as directors reach their
cognitive limits, additional information related to decision issues at hand can cause an information overload, adversely
affecting utilization of directors' potential on board tasks. On the other hand, moderate levels of conflict may bring more
information to be processed and an increased number of perspectives to be evaluated. Therefore, moderate levels of conflict
may benefit the depth of information processing. In a board context, information-processing demands (from interlocked
firms) can limit directors' ability to focus on the focal board and their contributions to board task performance (Kaczmarek
et al., 2014; Khanna et al., 2014).
Job-related diversity may lead to task-related conflict (Torchia et al., 2015) but also it may be not common that conflict
intensifies in the boardroom (Hambrick et al., 2008), such that the resolution of conflict cause information overload.
Moreover, as mentioned before it is likely that board discussions and decision-making processes are managed, keeping
conflicts at moderate levels (Ravasi and Zattoni, 2006; Zhang, 2010), which may, in fact, add to the depth of information
processing (De Dreu, 2006). From an information-processing lens, we argue that diversity may not have negative effects on
the elaboration of information that is key to in-depth information processing unless there are strong reasons to argue that
conflict usually intensifies in the boardrooms.
Summing up, positive effects of diversity on boards' strategic participation can be realized through the elaboration of
available information -shared and unshared-. Some researchers found that better alternative strategies often surface as a
result of certain aspects of job-related diversity (Golden and Zajac, 2001; Haynes and Hillman, 2010). Such diversity in the
top management team cultivates a wide range of task-relevant perspectives and information through debates (Simons
et al., 1999; Talaulicar et al., 2005). In turn, Fredrickson and Mitchell (1984) and Glick et al. (1993) have emphasized
that when there are debates on strategic proposals, upper-echelon executives are more likely to expend the resources
necessary for more analyses, more consultants, and more discussions. Minichilli et al. (2009) have also shown that
knowledge-based board diversity could further encourage directors to seek new information from their network
resources.
Therefore, job-related diversity may further enhance the range of information and knowledge shared as well as the
number of perspectives communicated during board discussions, increasing the depth of information processing. Generating
decision outcomes with better quality, boards can be expected to be more active in formulation and implementation of better
strategic decisions. We thus hypothesize that:
H2. The positive impact of job-related diversity on boards' strategic participation is mediated by the use of the directors'
knowledge and skills.
The hypotheses are illustrated in Fig. 1.
Fig. 1. Research model and hypotheses.
Data and methodology
Our research question was initially developed through a “fly on the wall” project. We followed how a board in one cor-
poration participated in initiating, formulating, and ratifying three distinct strategic decisions. The participation of the in-
dividual directors varied based on variations in the knowledge they individually had, and on accountability attributes of the
strategic question being addressed. However, to answer our research questions, we decided to use an approach exploiting the
“Value Creating Board” research instrument (Huse, 2009). This dataset is one of the few approaches to collect data from
boards' internal dynamics and decisions.
Several scholars have used this comprehensive research instrument to examine boards in various settings and in different
European countries such as Italy (Minichilli et al., 2009), the Netherlands (van Ees et al., 2008), Norway (Machold et al., 2011),
and Finland (Melkumov et al., 2015). Using a research instrument based on questionnaire survey methods follows calls in a
way that measures aiming at capturing actual board behavior should be applied (Hambrick et al., 2008).
Sample and data collection
For the purpose of this study, we use the Value Creating Boards survey developed in Norway. This survey was collected
during 2005 and 2006 (Sellevoll et al., 2007) and it is one of the few available datasets covering dynamics within boards. The
data is publicly available, and it has been used in different studies examining board behavior before (see e.g. Bankewitz, 2017;
Calabro and Mussolino, 2013; Kanadlı et al., 2017b; Lohe and Calabro 2017; Zhang, 2010). However, to our knowledge, none of
these studies has examined the relationship between job-related diversity and boards' strategic participation through diverse
knowledge. A detailed description of the database can be found in Huse (2009).
We decided to use this dataset because it is the most comprehensive in terms of sample size and number of respondents
amongst the surveys conducted in Europe (Huse, 2009). Furthermore, this dataset contains items that could be used directly
in our model, and mostly refer to constructs applied or suggested in extant research. The framework of the overall survey
design is similar to the one found in Huse (2005). Given the need to test our hypothesis on internal board processes, we found
that this data matches our theoretical approach. In total, 2954 firms were addressed within this survey. The overall response
rate of about 33% is fairly high for research on board process data (Finkelstein et al., 1996). A non-response analysis performed
by Huse (2009) indicated no statistically significant differences between respondents and non-respondents.
The “Value Creating Board” survey has a multi-respondent design and the questionnaire was sent to and answered by
CEOs, board chairpersons, and other board members (directors). Using CEO answers is the most common approach to
governance studies (see e.g. Zhang, 2010). We argue that using two or more key informants may increase the reliability of the
data, but different actors may also perceive and respond differently depending on their identity or perspectives (Huse and
Rindova, 2001).
For the purpose of this study, we decided to apply a design combining CEO and board member responses collected at two
different points in time. Whereas the CEOs answered the questionnaire in fall 2005, responses from directors were collected
during spring 2006. Especially looking at the influence compositional factors (such as diversity) may have on different board
processes, data collection at two different points of time increases the overall construct validity and supports arguments
related to the causal relationship between the variables examined in our study (Salomon and Shaver, 2005). To understand
the effects job-related diversity may have on boards' strategic participation (and not vice versa), we used board member
answers for our dependent variable and the mediating variable. For the independent variable and the control variables, CEO
answers were used.
The Norwegian context is particularly interesting to answer our research questions. Norway is a pioneer in board ap-
proaches (Singh and Vinnicombe, 2003) and has a tradition of active boards (Huse, 1990). Boards in Norway are often the
organizational body responsible to “lead the company's strategic planning, and make decisions that form the basis for the
executive management to prepare for and implement investments and structural measures” (NUES, 2012, p. 37). Further-
more, the importance of diversity has been discussed and already proven in Norwegian companies (Bjornali et al., 2016;
Knockaert et al., 2015). The Norwegian governance system has many similarities with other continental countries
(Machold et al., 2011). A detailed description of the Norwegian corporate governance context is presented in (Rasmussen and
Huse, 2012).
As in many cross-sectional studies examining board behavior (e.g. Melkumov et al., 2015), there is a possibility that
common method bias may affect the results (Doty and Glick, 1998). However, our approach using multiple respondents in
different moments limits potential problems as the dependent and independent variables are not drawn from the same
source (Melkumov et al., 2015). In addition, several measures to address a potential common method bias (Podsakoff
et al., 2003) with regard to the data collection process were conducted (Huse, 2009). Besides these measures, Har-
man's one-factor test was conducted to test for common method bias (Podsakoff et al., 2003). An exploratory factor
analysis provided evidence that the majority of variance accounts for more than one general factor. We found multiple
factors with eigenvalues greater than one. Partial correlation procedure was performed to control for the effects of
method variance (Lindell and Whitney, 2001). Results showed no indication that a common method bias should be an
issue in our study.
Our final sample includes complete and valid answers from 504 organizations. From the original 2954 organizations, 973
CEOs, and 562 board chairpersons answered the questionnaires (the overall response rate was 33% for CEOs and 21% for
chairpersons). From this group, we selected organizations where both the CEO and any board member answered the survey
(841 firms). From this point, we excluded 70 firms that had less than 10 employees, as micro-sized firms often lack formal
governance structures (Gedajlovic et al., 2004). We also excluded boards with less than two directors (Zhang, 2010) to make
sure that group dynamics are present at the board (Mathieu et al., 2014) (3 boards). We excluded all CEOs holding his/her
position for less than a year from the analysis (33 boards), as we are relying on his/her perception of diversity and want to
make sure that the perceived diversity is a valid measurement of actual diversity. Finally, we excluded from the sample the
surveys where the selected variables had any missing data.
Measures
Dependent variable
Boards' Strategic Participation is our dependent variable. Boards are involved in the strategic decision-making process in
different degrees (Ravasi and Zattoni, 2006) and scholars have previously used a wide range of measures to estimate boards'
involvement in strategy (e.g. Machold et al., 2011; Nielsen and Huse, 2010b; Pugliese et al., 2009). Based on the theoretical
perspective and scope of the study, the conceptualization of sets of strategic tasks ranges from a focus on strategic control
(Fama and Jensen, 1983) to a more active role in shaping strategy formulation and implementation (Zahra and Pearce, 1989).
To be precise about our construct and in line with Minichilli et al. (2009) as well as Zona and Zattoni (2007), we measure
boards' strategic participation as the mean of three items: i) Making proposals on long-term strategies and main goals; ii)
Making decisions on long-term strategies and main goals; and, iii) Putting decisions on long-term strategies and main goals into
action. The three elements were answered again from 1 to 7 by board members. The Alpha Cronbach for this composition is
.908. This composition allows understanding the strategic and long-term commitment of board members' decision, covers all
phases of the strategic decision process (Minichilli et al., 2009), and makes a distinction between strategic participation and
control.
Independent variable
Based on Forbes and Milliken (1999) and in line with previous research (Nielsen and Huse, 2010b; Torchia et al.,
2015), job-related diversity refers to the degree of perceived board diversity by the CEO with regard to functional, in-
dustrial and educational backgrounds. In a pilot study for the “VCB” instrument, direct diversity attributes of individual
directors were also assessed (Huse, 2009). However, given the behavioral approach of this study, perceived diversity was
chosen as the final instrument. We follow Lawrence (1997) arguing that perceptions rather than reality influence work
attitudes and involvement. Approaches relying on perceived diversity are commonly used in studies that aim to examine
diversity effects on board decision-making (Nielsen and Huse, 2010b; Westphal and Milton, 2000). This approach finds
support by Miller et al. (1998) as perceived diversity measures (answered by the CEO) are reasonable proxies for actual
diversity.
Therefore, the independent variable is composed of the perceptions of job-related diversity by the CEO. The independent
variable (Job-related diversity) was calculated as the mean of the following three elements regarding “deep” diversity among
the board members: i) “Our board members represent diversity with regards to functional background (e.g. sales, finance,
accounting, marketing, etc.)”, ii) “Our board members represent diversity with regards to industrial background (e.g. different
industries and firms)”, and iii) “Our board members represent diversity with regards to educational background (different
universities, schools, and type of education)”. This way the independent variable shows diversity in terms of functional
experience, industry knowledge and education. The Cronbach Alpha for this composition is .751. The three elements were
originally measured with a 7 points Likert scale, where 1 total disagreement and 7 a total agreement with the proposed
statement.
Mediating variable
The mediating variable in our study is directors' use of knowledge and skills (Board Members' Use of Knowledge and Skills)
following the theoretical suggestion by Forbes and Milliken (1999, p. 496): “people on this board are aware of each others' areas
of expertise, when an issue is discussed, the most knowledgeable people generally have the most influence, task delegation on this
board represents a good match between knowledge and responsibilities (…) and information flows quickly among board mem-
bers.” Using the Value Creating Boards' survey, this construct was computed as the mean of the following four items, all of
them answered with the same 7 points Likert scale: i) When controversial decisions are made, the board most often listens to the
board members with the most experience and knowledge on the issue; Our board members ii) accept and acknowledge the pos-
sibility that they might be wrong in their considerations; iii) willingly offer advice based on private knowledge, ideas, and views;
and iv) communicate their personal preferences and considerations open and freely. The Alpha Cronbach for this composition is
.702. This conceptualization allows understanding to what extent knowledge, skills, and experiences are shared, accepted and
acknowledged among board members. This is in line with previous conceptualizations of the concept as it mostly refers to
measures aiming at the division of labor as well as open communication (see e.g. Minichilli et al., 2012; Zattoni et al., 2015;
Zona and Zattoni, 2007).
Control variables
Consistent with prior research on boards (e.g. Minichilli et al., 2009) we controlled on different levels. We included
several variables where effects on boards' strategic participation might be assumed, organized at different corporate levels.
Control variables are at the firm, board and CEO levels. Furthermore, we include an extra control layer for board strategic
control tasks.
At the firm level, we controlled for: i) Firm age; ii) Firm size by number of employees; iii) High-tech nature of the firm.
These variables might be important determinants of boards' strategic participation (Knockaert et al., 2015).
At the board level, we controlled for: iv) The number of board members; v) The length of board meetings; vi) The gender of
the board members; vii) Board member changes. By doing so, we take into account our theorizing suggesting that different
board variables may influence the tasks boards perform (Huse, 2005). The number of board members is part of the well-
studied “usual suspects” and often controlled for in previous board research (see e.g. Knockaert and Ucbasaran, 2013; van
Ees et al., 2008). We controlled for gender diversity at the board (ratio of female directors) to capture different dimensions
of diversity as well (Nielsen and Huse, 2010a). Board member changes refer to the year board composition was renewed the
last time.
We further controlled at the CEO level for: viii) CEO duality (Haynes and Hillman, 2010); and ix) CEO tenure as these
measures are often used as proxies for CEO power, which in turn may affect board work (see e.g. Shen, 2003). Additionally
and as mentioned before, the nature of the analysis, using multi-respondent answers, avoids potential biases and corre-
lations in individual respondents, increasing the reliability of the data and results (Huse and Rindova, 2001; Nielsen and
Huse, 2010a).
Finally, we controlled for board strategic control tasks, as one of our main assumptions refers to the differences between
boards' strategic participation vs. strategic control tasks (Minichilli et al., 2009). We conceptualized boards' strategic control
as the mean of the following items: The board has with great authority been involved in i) Controlling the follow up of
decisions on long-term strategies and main goals into action; ii) Evaluation of acquisitions of other firms; iii) Evaluation of
restructuring and downsizing; iv) Evaluation of new technological solutions; v) Evaluation of firm investments and capital
spending; and vi) Evaluation of the firm's organization and personal resources. Cronbach's alpha for the 6 items' composition is
.666.
The summarized description of the used variables can be seen in Table 1.
Table 1
Description of variables.
Variable Type Description Theoretical background

Job-related diversity Independent variable Degree of perceived board diversity by the CEO Torchia et al. (2015)
with regard to functional, industrial and Forbes and Milliken (1999)
educational backgrounds Nielsen and Huse (2010a)
(see Table 4 for more detail)
Boards' Strategic Dependent variable Strategic and long term commitment of board Ravasi and Zattoni (2006)
Participation members' decision Minichilli et al. (2009)
(see Table 4 for more detail) Zona and Zattoni (2007)
Board Members' Use of Mediator Mean of items related with the extent Forbes and Milliken (1999)
Knowledge and Skills knowledge, skills and experiences are shared, Minichilli et al. (2012)
accepted and acknowledged among board Zattoni et al. (2015)
members. Zona and Zattoni (2007)
(see Table 4 for more detail)
Firm age Control Variable e firm Number of years since firm foundation Knockaert et al. (2015)
Firm size level Number of employees Knockaert et al. (2015)
High-tech nature of the firm Do you consider the firm as a high tech firm? Knockaert et al. (2015)
Number of board members Control Variable e board How many board members with full voting rights Knockaert and Ucbasaran (2013)
level had the firm per October 10th, 2005? van Ees et al. (2008)
Huse (2005)
Length of Board Meetings How many hours does an ordinary board meeting Knockaert and Ucbasaran (2013)
in your firm most often last? van Ees et al. (2008)
Huse (2005)
Gender Diversity Percentage of women on boards Nielsen and Huse (2010a,b)
Board Member Changes When was the board composition last time Huse (2005)
changed?
CEO duality Control Variable e CEO level Is the board chairperson CEO of the firm? Haynes and Hillman (2010)
CEO Tenure How many years have the present CEO been in Shen (2003)
this position?
Board strategic control Control variable for differences between boards' strategic Minichilli et al. (2009).
tasks different tasks participation and strategic control tasks (see
Table 2 for more detail)
Analyses and findings
We tested our theoretically derived hypotheses using multiple linear regression analysis. We examined the direct effect
job-related diversity has on boards' strategic participation (Hypothesis 1). Additionally, we carried out mediation analysis
using bootstrapping procedures (Hayes, 2013) to test for the mediating role of the use of knowledge and skills in this rela-
tionship (Hypothesis 2). This non-parametric approach testing for the indirect effects is recommended (see e.g. Hayes, 2009)
over traditional approaches such as Baron and Kenny (1986) or Sobel (1982). We followed the suggestions by Preacher and
Hayes (2008) and calculated the indirect effects based on 5000 bootstrapping resamples with 95% confidence intervals (CIs).
Under bootstrapping, the direct effect is tested prior to mediation to determine whether there is an effect to mediate and later,
an indirect effect is considered significant if zero falls outside the range of the 95% confidence intervals.
We present descriptive statistics such as mean and standard deviation, and Pearson's product-moment correlation co-
efficients for the variables used in our analyses in Tables 2 and 3. VIF-tests, controlling for whether multicollinearity may affect
our results, show that all VIF values meet the requirements by (Myers, 1990), being within acceptable ranges between 1 and 3.
Table 2
Descriptive statistics.
Definition Unit Min. Max. Mean Standard VIF

Deviation
Ln Firm Age Number of years since firm foundation Years 0.00 5.87 3.40 1.12 1.090
Ln Firm Size Number of men working at December 31st, No. Workers 2.30 9.90 4.94 1.56 1.919
2004?*
High-tech Do you consider the firm as a high tech firm? Dummy variable 0.00 1.00 0.39 0.49 1.107
Number of Board Members How many board members with full voting No. Directors 3.00 12.00 6.38 1.90 1.973
rights had the firm per October 10th, 2005?*
Length of Board Meetings How many hours does an ordinary board Hours .50 9.00 3.99 1.32 1.208
meeting in your firm most often last?
Gender Diversity How many board members with full voting Percentage 0.00 1.00 0.21 0.16 1.243
rights are women? e divided by the number of
board members
Ln Board Member Changes When was the board composition last time Years (since 0.00 3.26 0.49 0.69 1.226
changed? last change)
(continued on next page)
Table 2 (continued )
Definition Unit Min. Max. Mean Standard VIF

Deviation
CEO Duality I am also Board chair Dummy variable 0.00 1.00 0.04 0.20 1.091
CEO Tenure How many years have the present CEO Years 1.00 30.00 7.12 6.26 1.186
functioned in this position?
Boards' Strategic Control The board has with great authority been Likert Scale (1e7) 1.00 6.67 4.13 1.17 1.137
involved in i) Controlling the follow up of
decisions on long term strategies and main goals
into action; ii) Evaluation of acquisitions of other
firms; iii) Evaluation of restructuring and
downsizing; iv) Evaluation of new technological
solutions; v) Evaluation of firm investments and
capital spending; and vi) Evaluation of the firm's
organization and personal resources.
Job-related Diversity See Table 4 for more detail Likert Scale (1e7) 1.00 7.00 4.82 1.25 1.109
Use of Knowledge and Skills See Table 4 for more detail Likert Scale (1e7) 2.25 7.00 5.38 0.91 1.053
Boards' Strategic Participation See Table 4 for more detail Likert Scale (1e7) 1.00 7.00 5.53 1.42
* Given the structure of the survey, data was collected in different stages from different agents (CEOs, board chairpersons and board members) and the latest
official data when launching the survey.
Table 3
Pearson product-moment correlation analysis.
Pearson Correlation 1 2 3 4 5 6 7 8 9 10 11 12 13
1 Ln Firm Age 1
2 Ln Firm Size .088* 1
3 High-tech .060 .223** 1
4 Number of Board Members .101* .620** .115** 1
5 Length of Board Meetings .029 .345** .153** .298** 1
6 Gender Diversity .050 .263** .063 .409** .108* 1
7 Ln Board Member Changes .016 .261** .202** .267** .265** .207** 1
8 CEO Duality .045 .085 .010 .130** .065 .022 .037 1
9 CEO Tenure .195** .150** .122** .045 .066 .081 .223** .228** 1
10 Boards' Strategic Control .053 .254** .102* .071 .129** .098* .095* .076 .038 1
11 Job-related Diversity .062 .033 .107* .100* .027 .009 .073 .096* .044 .154** 1
12 Use of Knowledge and Skills .040 .035 .013 .097* .019 .069 .013 .005 .032 .072 .184** 1
13 Boards' Strategic Participation .019 .075 .074 .093* .092* .076 .025 .064 .014 .121** .100* .348** 1
* Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed).
N ¼ 504.
In order to assess the measurement model validity and construct discriminant validity, we performed a confirmatory
factor analysis (CFA) with the variables of interest in our study. Results of the CFA provide statistical evidence for a good model
fit of the measurement model (CMIN ¼ 2.065; CFI ¼ .985; RMSEA ¼ .046). Factor loadings all ranged above .624 (p < .001),
with only one exception .270 (p < .001). Results regarding the construct discriminant validity of the multi-item constructs are
presented in Table 4. Reliability scores are all above the critical threshold of .7.
Table 4
Construct reliability and factor loadings.
Constructs Measures Factor loadings Cronbach alpha

Job-related Diversity Our board members represent diversity with regards to …. .751
i) ... functional background (e.g. sales, finance, accounting, marketing etc.) .729
ii) …industrial background (e.g. different industries and firms) .675
iii) … educational background (different universities, schools and type of .735
education)
Board Members' Use of i) When controversial decisions are made, the board most often listens to the .270 .725
Knowledge and Skills board members with the most experience and knowledge on the issue
ii) Our board members accept and acknowledge the possibility that they might .624
be wrong in their considerations
iii) Our board members willingly offer advice based on private knowledge, ideas .939
and views
iv) Our board members communicate their personal preferences and .828
considerations open and freely
Boards' Strategic The board has, with great authority, been involved in … .908
Participation i) …making proposals on long term strategies and main goals .909
ii) …making decisions on long term strategies and main goals .945
iii) … putting decisions on long term strategies and main goals into action .779
For Hypothesis 1, we tested the direct effect of our independent variable on the dependent variable in Model 1. The
relationship between our independent variable and the mediator was tested in Model 2. Finally, the relationship between job-
related diversity and boards' strategic participation after the mediator was entered in the model is tested in Model 3. Results
including standardized beta coefficients, CIs, and model fit statistics are displayed in Table 5.
Table 5
Linear regression and mediation analysis.
Model 1 Model 2 Model 3
Strategic participation Use of knowledge and skills Strategic participation
Coef. LLCI ULCI Coef. LLCI ULCI Coef. LLCI ULCI

Ln Firm Age .028 .137 .081 .010 .060 .080 .034 .136 .069
Ln Firm Size .025 .140 .090 .040 .114 .033 .003 .111 .104
Hightech .129 .136 .394 .012 .181 .158 .135 .113 .384
Number of Board Members .072 .018 .163 .038 .096 .020 .094 * .009 .179
Length of Board Meetings .073 .029 .176 .030 .036 .095 .058 .039 .154
Gender Diversity .279 .559 1.118 .278 .813 .258 .431 .356 1.219
Ln Board Member Changes .092 .106 .290 .009 .118 .136 .087 .099 .273
CEO Duality .481 .145 1.109 .130 .531 .270 .553 .036 1.141
CEO Tenure .005 .027 .016 .006 .008 .019 .009 .029 .012
Boards' Strategic Control .107 .005 .219 .037 .035 .109 .087 .018 .192
Job-related Diversity .104 * .002 .206 .129 *** .064 .195 .034 .064 .131
Use of Knowledge and Skills .546 *** .416 .676
F(df1,df2) F(11,492) ¼ 1.996 F(11,492) ¼ 2.375 F (12,491) ¼ 7.756

p .027 .007 <.001
R2 .043 .050 .159
The levels of significance are *p < .05; **p < .01; ***p < .001.
LLCI ¼ Lower Level Confidence Interval; ULCI ¼ Upper Level Confidence Interval.
The results of our empirical analysis provide support for Hypothesis 1, suggesting that job-related diversity and boards'
strategic participation are significantly and positively related (coeff. ¼ .104, p < .05). The explanatory power of Model 1 is
rather low, with an R2 of .043 and F (11,492) ¼ 1.196, p < .05. Job-related diversity is also significantly and positively related to
our mediating variable directors' use of knowledge and skills (coeff. ¼ .129, p < .001), as shown in Model 2, with R2 ¼ .050 and
F (11,492) ¼ 2.375, p < .01.
The final Model 3, with R2 ¼ .159 and F (12,491) ¼ 7.756, p < .001, provides evidence that the relationship between job-
related diversity and boards' strategic participation disappears when the mediator entered in the regression (coeff. ¼ .034,
p > .05). Looking at the indirect effect of job-related diversity on boards' strategic participation (.129.546) we obtain a result
of .071 with a confidence interval of [.034, .116], not containing zero. Therefore, the effect is considered to be significant and
Hypotheses 2 is supported by our results.
Discussion
In this article, we have presented a model that stress the positive effects of job-related diversity on boards' strategic
participation and the essential role of board process of use of knowledge and skills in the activation of this diversity. The
information processing theoretical perspective applied to the board context serves as a framework for explaining this aspect
of board behavior (Boivie et al., 2016; Dalton and Dalton, 2011; Zhang, 2010).
Job related diversity has the capacity to activate the use of different knowledge and skills and also increases communi-
cation and diversity of perspectives during board meetings. Therefore, board decision outcomes lead to better quality and
better strategic decisions. This effect has strong implications for boards and companies. It shows the importance of inner and
not only superficial diversity among directors. This inner diversity on boards enhances productive discussions that univocally
lead to better strategic outcomes.
Theoretical implications
There are numerous research approaches that link socio-demographic diversity (gender, ethnicity, etc.) with board and
companies' outcomes and strategies. However, it is important to understand the potential deeper impact of diversity on the
internal dynamics of boards. Directors with different knowledge, experiences, and functional backgrounds contribute with
different views and opinions on corporate strategy, especially in an environment that facilitates directors' use of their
knowledge, skills, and professional experience during discussions.
The information processing theoretical perspective provides a novel theoretical perspective to better explain board
behavior (Boivie et al., 2016; Dalton and Dalton, 2011; Zhang, 2010). We extend information-processing research in board
context, which has neglected to examine the effects diversity and board processes may have on information-processing
(Khanna et al., 2014). Our theorizing that boards characterized by diversity in knowledge, skills, and experience, are more
active in engaging in strategic decision-making, is supported. This finding of a positive association between job-related di-
versity and the boards' strategic participation is different than the insignificant results reported by Minichilli et al. (2009). One
reason for these different results may be the different conceptualization of diversity. While we focus on an overall form of job-
related diversity, Minichilli et al. (2009) examine the effects of background diversity (e.g. managers in other companies,
consultants, academics, lawyers, etc.) on boards' strategic participation.
From an IPT perspective, group processes are key factors in realizing the diversity's potential, revealing a broader range of
information -shared and unshared- (van Knippenberg et al., 2004). We hypothesized a positive mediation effect of directors'
use of knowledge and skills, and our analysis provided support for these arguments, showing that job-related diversity is
positively associated with the use of knowledge and skills. This fully transmits the positive effects on board strategic
participation. We, therefore, enrich research on boards by showing the importance of board processes in realizing the positive
effects of diversity. These results contribute to the understanding that board processes are important determinants of boards'
participation in and contribution to strategic decisions (e.g. Zona and Zattoni, 2007). Moreover, our findings also suggest that
having job-related diversity in the boardroom is important but making use of it is key for maximizing boards' outcomes
(Zhang, 2010).
Another interesting finding concerning our mediation analysis is the positive effects of diversity on use of knowledge and
skills, which contradicts theoretical arguments for a negative association (Forbes and Milliken, 1999). Instead of problems
related to communication and coordination or cohesiveness (Boivie et al., 2016), taking directors' cognitive capacity limits
into account may better explain the effects diversity may have. This idea is supported by research in a workgroup context (De
Dreu and Weingart, 2003). Job related diversity makes board members more willing to further collect and share information
and listen different ideas and opinions (Minichilli et al., 2009), which turns into better board strategic participation.
Indeed, our findings of positive mediation effects also challenge previous studies based on social categorization per-
spectives, emphasizing that demographic heterogeneity may negatively affect representation and the use of minorities'
different perspectives and information in board discussions due to out-group categorization (e.g. Zhu, 2014, 2013). One
explanation may be that certain characteristics minority directors possess may help them break through social barriers and
still influence board decision-making. Research demonstrated that when minority members have certain backgrounds and
professional experience (McDonald et al., 2008), or certain board experience (Westphal and Milton, 2000) or interlinks with
other firms (Glass et al., 2016), negative effects of bias categorization may be less detrimental. From this perspective, having
different knowledge and skills may be one important factor determining directors' influence on boards.
Finally, our results demonstrated the importance of operationalizing more fine-grained definitions of board tasks
(Bankewitz, 2017; Huse, 2005). Boards may participate in the strategy process by performing different tasks. Previous studies
mainly investigated boards' strategic involvement, which is operationalized by considering the strategic control, advice and
counsel, and strategic participation (Pugliese et al., 2009). Very few studies have differentiated these tasks and demonstrated
that the same factors may have different impacts on these tasks (e.g. Minichilli et al., 2009; Zona and Zattoni, 2007).
Strategic proposals, as well as decisions of TMTs, can be evaluated by boards (strategic control) and this type of strategic
involvement may require boards to be mainly comprised of outside directors for objective evaluations. Job-related diversity
may have only an incremental impact on strategic control, which can be considered as a relatively more routinized set of
tasks. Boards may contribute to strategic decision-making also by providing advice and counsel to the TMT particularly about
the externalities surrounding the strategic decision-making. For these sets of tasks, directors with interlinks to other firms in
the industry may be preferable, providing information about firms and industry including information about practices and
processes they adopt. When it is the specific piece of information about a big investor (e.g. a bank) that is investigated by the
TMT, once again job-related diversity may have little impact on the quality of advice and counsel administrated by a board.
However, the quality of strategic proposals, the creativity of board solutions to a decision problem or to the imple-
mentation of a chosen strategy may heavily depend on directors' different knowledge, skills, and experience. Thus, it might be
essential to use a more fine-grained operationalization of board strategic involvement, which may compose of strategic
control, advice and counsel, and strategic participation. Accordingly, our study demonstrates that job-related diversity is one
key factor impacting boards' strategic participation task performance.
Implications for policy-makers and practitioners
The results of this study point to the importance of i) understanding the positive effects of diversity on directors' skills,
knowledge, and experience and ii) realizing the vital role board processes play to fully benefit from the positive effects of this
diversity. Accordingly, this study has implications for practitioners and policy-makers. For corporate leaders, it first suggests
and supports their interest in appointing directors with different skills, knowledge, and experience on corporate boards. For
those who want their boards to play an important role in the strategy process, such diversity may help boards to become
active players. Second, to fully exploit such diversity effects, a boardroom atmosphere needs to be in place, where directors
are willing to use their knowledge and skills.
Many corporate governance codes (Spain, UK, the Netherlands …) are already pointing to the importance of diversity on
boards, and they even mention the importance of diverse profiles among independent directors. Diversity needs to move
beyond the salient directors' characteristics (gender or ethnicity) and put together different profiles with different
backgrounds, among other diversities. Our results show the need for neat and careful selection processes for new directors
(Bilimoria and Piderit, 1994). Nomination committees need to be aware of the importance of job-related diversity for the
company's strategy.
Diversity on boards has been mainly targeted superficially and focused on diversity in demographics and their effects on
board performance are inconclusive (Kanadlı et al., 2017b). The shift to skills and knowledge diversity would allow boards to
enhance the diversity of thinking avoiding potential biases in selection or discrimination towards minorities (Gabaldon et al.,
2016). This way, although unintentionally, while looking for job-related diversity, boards may end up enhancing both skills
and knowledge and demographic diversity eincluding gender diversity-. Even more, the search for job-related diversity
might create a more open atmosphere at the board level where there would be no insiders or outsiders and all members could
be equally be heard (Kanadlı et al., 2017b).
For policy-makers, this study may help to direct their attention to board diversity and board tasks once again but with a
different focus. The content of existing governance codes and best practices of governance related to boards mainly focuses on
the board monitoring role and board independence (e.g. NASDAQ Stock Exchange guidelines, 2010; New York Stock Exchange
guidelines, 2010). We invite policy-makers to re-evaluate these policies, considering that one component may not fit the
various tasks boards perform (often simultaneously). It may be more important, related to the ongoing efforts of increasing
the diversity on corporate boards, which policy-makers consider the importance of various mechanisms that facilitate the use
of diversity's potential. Otherwise, for example increasing the number of women on boards (implication of women quota)
may not be more than compliance. It is unrealistic to think that once regulations that increase diversity on boards are in place,
firms with diverse boards will fully benefit from this structure.
Limitations and future directions
Our study has limitations, and some of these limitations may create opportunities for future research. As mentioned
before, information-processing perspective suggests that due to cognitive limitations, individuals' ability to effectively pro-
cess information also depends on whether information processing demands exceeds information processing capacity
(O'Reilly, 1980; Tushman and Nadler, 1978). Khanna et al. (2014) showed that interlocked directors might reach a point where
information overload occurs due to information processing demands from other firms. Consequently, they show that highly
interlocked directors may not contribute to board task performance at the focal firm even if they have the human capital
(skills, knowledge, or experience) to do so. Previous studies provide support indicating highly interlocked boards may fail to
contribute to strategy processes (Ruigrok et al., 2006). Our data set does not allow us to control for directors' multiple board
appointments. Future research may investigate to what extent and how busy board conditions (Kaczmarek et al., 2014) may
influence the effects diversity may have on board tasks as well as decision-making.
One additional research stream can be generated, investigating the important effects contingencies that may specify when
or under which conditions board diversity may have a negative or positive impact on boards (Eagly, 2016). An interesting
research avenue can be generated by the integration of information-processing theory with agency and/or resource de-
pendency theories. For instance, previous studies have provided evidence that board diversity (gender diversity) may have
positive effects on board performance in monitoring executives and linking executives' pay to firm performance (e.g. Adams
rez et al., 2015). Some others, also through agency theory perspective,
and Ferreira, 2009; Baixauli-Soler et al., 2016; Lucas-Pe
demonstrate board diversity (gender diversity) may reduce information asymmetry in the stock market (e.g. Abad et al.,
2017). These studies can be interpreted as evidence of board diversity impact on executives' effort norms as well as
sharing of task-related information and perspectives. In this study, we assume that a top management team and a board form
a larger group to collectively generate better quality and creativity decision outcomes. Future, research, integrating agency
and information-processing perspectives, may examine whether and how the presence of women directors might influence
job-related diversity-boards’ strategic participation. It may be also interesting to bridge external governance mechanisms
(e.g. legal environments) with internal ones (boards) (Aguilera et al., 2015; Hambrick et al., 2008) and investigate interaction
effects on diversity' potential.
Moreover, the Norwegian governance context has many similarities to other countries (Nielsen and Huse, 2010b;
Zhang, 2010) and Norwegian corporate governance experience has been closely watched and to some extent adopted
in Europe, including Scandinavian countries. Still, contingency aspects have to be included. Each country has its own
characteristics. A cross-country analysis that will examine diversity's influence on boards under country-specific con-
tingencies will be useful.
Finally, we acknowledge that the gender diversity landscape has changed in Norway with the implication of a gender
quota regulation and also has been changing in several European countries (e.g. Spain or Germany). Female directors may
have different backgrounds and values than their male counterparts and thus an increase in numerical representation of
women on boards is expected to positively influence job-related diversity on boards (Post and Byron, 2015). However, other
than adding on the levels of job-related diversity in the boardrooms, increasing the number of women directors cannot be
seen as a factor altering the importance of using the directors' knowledge and skills. Indeed, several contingencies are
identified in the literature, surrounding the influence of women on competent board work (e.g. Nielsen and Huse, 2010a).
Whether created by female directors or their male counterparts, the utilization of board diversity on strategic decisions
requires the use of directors' knowledge, skills, and experience.
Conclusions
The aim of this study is to examine the effects of job-related diversity on boards' involvement in strategy process by
making decisions, suggesting proposals, and contributing to strategy implementation (strategic participation). By doing so we
differentiate boards' strategic participation from other ways of boards' involvement in strategy processes, providing more
fine-grained definitions of sets of board tasks. To better understand the complex effects diversity may have, we considered the
mediating role of board processes, namely the use of directors' knowledge and skills. We have used information-processing
theory as a novel approach to explain complex effects of job-related diversity. Our findings may also provide important in-
sights for scholars' effort in identifying certain conditions under which positive effects of diversity may be realized (Byron and
Post, 2016; Eagly, 2016).
Research has largely anticipated negative effects of contingencies surrounding the effects of diversity, demonstrating that,
as a result, diversity's potential cannot be fully utilized or diversity may even have detrimental effects on decision outcomes.
However, solutions to these obstacles have stayed underexplored. This study shows not only the importance of job-related
diversity on board's strategic participation but also the mediating role of the board environment where sharing knowl-
edge and ideas are welcomed. In a search for solutions to cope with several barriers surrounding the potential of board
diversity, our study suggests scholars an important direction for enabling directors to use their different knowledge and skill
sets openly and freely.
Acknowledgments
We are especially grateful to the Associate Editor, Dr. Alejandro Escriba , and two anonymous reviewers for their very
insightful comments on earlier drafts of this paper. We would like also to thank Morten Huse for all his support in the process.
Patricia Gabaldon would like to thank the support from the Spanish Ministry of Economy, Industry and Competitiveness
(project FEM2017-83006-R).
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Contents lists available at ScienceDirect

Long Range Planning

How does job-related diversity affect boards' strategic

Theoretical framework and hypotheses development

Boards' strategic participation

Complex effects of job-related diversity: an information-processing approach

Job-related diversity and the boards' strategic participation

Mediation effect of use of knowledge and skills

Fig. 1. Research model and hypotheses.

Data and methodology

Sample and data collection

The summarized description of the used variables can be seen in Table 1.

Variable Type Description Theoretical background

Analyses and ﬁndings

Deﬁnition Unit Min. Max. Mean Standard VIF

Deﬁnition Unit Min. Max. Mean Standard VIF

* Correlation is signiﬁcant at the 0.05 level (2-tailed).

Constructs Measures Factor loadings Cronbach alpha

Model 1 Model 2 Model 3

Strategic participation Use of knowledge and skills Strategic participation

Coef. LLCI ULCI Coef. LLCI ULCI Coef. LLCI ULCI

F(df1,df2) F(11,492) ¼ 1.996 F(11,492) ¼ 2.375 F (12,491) ¼ 7.756

Implications for policy-makers and practitioners

Limitations and future directions

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