The literature on corporate governance highlights the importance of the board's effectiveness for achieving company success (Petrovic, 2008; Nicholson and Kiel, 2004). Boards of directors are a key element in the study of corporate governance, not only because of their disciplinary or controlling roles, but also because of their active participation in their company's key decisions (Barroso, De la Concha, Vecino and Villegas, 2009). We believe that the board's participation in a company's major international decisions is particularly important. Globalisation and the liberalisation of financial markets have dramatically changed the business environment, making internationalisation strategies more important than ever before. Businesses around the world are becoming increasingly globalised, which encourages firms to develop an international presence. Under these conditions, firms need to have effective boards that can make appropriate decisions on internationalisation.
However, despite the importance of the board for the organisation's results and the high degree of internationalisation that many firms have experienced in recent years, the majority of studies relating to these two concepts continue to rely on traditional variables as the explanatory elements for their models: the proportion of external directors; board size; or duality of CEO / President of the Board of Directors (Ellstrand, Tihanyi and Johnson, 2002; Datta, Musteen and Herrmann, 2009; Petrovic, Kakabadse, A. and Kakabadse, N.K., 2006; Kim, Prescott and Kim, 2005; Rivas, 2012; Lien, Piesse, Strange and Filatotchev, 2005). In general, these variables have been characterised by ambiguity, and investigators have been unable to reach a consensus on the variables that define the boards that are more or less effective in fulfilling their roles, and therefore, in affecting the firm's international performance (Kim, 2005; Kim and Cannella, 2008; Daily and Dalton, 1993; Dalton, Daily, Johnson and Ellstrand, 1999).
Furthermore, from our point of view, these works have proposed a set of unsuitable and incomplete models, in which boards of directors are treated as homogenous groups, without taking account of their social and human dimensions (Tian, Haleblian and Rajagopalan, 2011; Hillman and Dalziel, 2003). More in-depth studies need to be carried out into how board composition, through its human and social capital, affects the firm's international performance. While human capital allows directors to become familiar with and understand the logic and dynamics of external markets and the global business environment, its social capital provides external information that mitigates the risks associated with internationalisation strategies.
Hillman and Dalziel (2003) propose a theoretical model that examines how board capital, consisting of human and social capital, affects the firm's performance. In the wake of this study, many researchers have carried out empirical analyses of how certain elements of the board's human and social capital can be used to improve the firm's principal organisational results (Lester, Hillman, Zardkoohi and Cannella, 2008; Stevenson and Radin, 2009; Kor and Sundaramurthy, 2009; Wincent, Anokhin and Boter, 2009; Tian et al., 2011; Haynes and Hillman, 2010; Dalziel, Gentry and Bowerman, 2011). However, the joint effect of these two elements on the firm's international results has been overlooked. While there are a few prior studies that analyse the effect of the human capital of the TMT on the firm's principal international results, (Athanassiou and Nigh, 2002; Peyrefitte, Fadil and Thomas, 2002; Reuber and Fischer, 1997; Sambharya, 1996), there are virtually no studies that analyse the board's human capital, and even fewer that also include external social capital. Therefore, the principal objective of this study is to carry out an empirical analysis of the importance of the board of directors on the principal international results, including a study not only of the resources brought by the board through its own human capital, but also through its access to new, external resources.
In this study we aim to highlight the importance for the firm of the board's capacity, through its knowledge and abilities, to tackle the complexity and the high demand for information-processing associated with international diversification. The knowledge that the firm's board members contribute, through their experience, could be used in international markets to overcome the risks associated with foreign operations (Ellstrand et al., 2002). Similarly, although individual board members possess unique resources, they also require access to complementary resources, such as information, power and influence, so that they can be involved in the management of international business. A diversity of external contacts gives board members greater access to information on the markets, innovations, capital, investors and other key assets that are needed to launch a new business. These connections could also benefit the company by serving as a communication channel between external organisations and the firm, and would be a very important tool when particular information is required to mitigate the risks associated with internationalisation.
This work is structured as follows: in the first section we set out the reasons for choosing this topic, and explain our main objectives. In the following sections we carry out a literature review, which will help us to formulate a set of hypotheses. In the final section we present the empirical evidence and an analysis and interpretation of the data obtained.
Literature review and working hypotheses
The human capital of the board
The human capital of the board can be defined as the capabilities and knowledge that individual members bring to the board, stemming from their investment in education and/or experience (Stevenson and Radin, 2009; Becker, Huselid and Ulrich, 2001; Nicholson and Kiel, 2004; Wincent, Anokhin and Ortqvist, 2010; Kor and Sundaramurthy, 2009; Lester et al., 2008; Becker, Chambers and Wilks, 1988; Coleman, 1988). While knowledge acquired through experience (accumulated or not) leads to the adoption of specific human capital, learning, through education, tends to have a more general connotation, since it is assumed that the benefits of education encompass not only learned information, but also the abilities associated with learning through a diversity of situations. Both elements are included in this study.
The structures for learning and knowledge gained from a higher level of formal education will be of immense value for boards (Wincent et al., 2010; Reeb and Zhao, 2009; Kim and Lin, 2010). Board members with high levels of education bring a greater ability for learning and more effective information-processing (Bantel and Jackson, 1989; Hambrick and Mason, 1984; Pennings, Lee and van Witteloostujin, 1998; Wiersema and Bantel, 1992) and they are therefore able to become involved in the company's strategies. Board members with high levels of education are more likely to participate in the firm's international strategies, since these require the directors to quickly assimilate large amounts of complex information and if the knowledge structures are in place, they are more able to interpret and categorise the information presented to them. There is evidence of a positive relationship between higher levels of education among directors and their willingness to make use of external information and external consultants or to monitor more extensively the firm's accounting systems (Crabtree and Gomolka, 1991).
More highly educated people are better able to find creative solutions to help the firm they represent (Wincent et al., 2009). They are fundamental to the acquisition, use and understanding of knowledge, and the development of abilities that support effective decision-making in an international context. A higher level of education is also associated with openness to innovation and a tolerance of ambiguity (Goll, Johnson and Rasheed, 2007); two fundamentally important aspects when the board is considering strategic change linked to the firm's internationalisation.
We therefore propose the following working hypothesis:
H1. The board members' level of education is positively related to the degree of the firm's international diversification.
In addition to examining the board's level of education, the majority of studies focus on a more specific human capital, derived from the directors' experiences (Stevenson and Radin; 2010; Tian et al., 2011; Kroll, Walters and Wright, 2008; Haynes and Hillman 2010; Kor and Misangyi, 2008; Sirmon, Arregle, Hitt and Webb, 2008). Experience (either personal or via feedback from an event) improves future behaviours specifically because of the knowledge that has been acquired. Individuals who learn and accumulate knowledge through experience feel more enabled and make a more active contribution to the firm's competitive advantage (March, 1999). Directors with experience can participate more fully in their role because, through their learning, they might be able to make a positive contribution to the firm's results. The possession of relevant knowledge and learning through experience, therefore, could be important for explaining board effectiveness (Kroll et al., 2008).
Board members' international experience brings a specific tacit knowledge, which is one of the resources that is hardest to imitate (Barney, 1991). Firms can improve their ability to face the challenges of the international environment by electing members to the board that have the particular characteristics, abilities or experience required for the internationalisation process. A director's international experience might be an attractive characteristic for other firms that are interested in acquiring this tacit knowledge.
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