Board Competence and Top-Management Team External Ties for Performance

This study explains the inconsistent findings of previous research on board management by examining the direct and interaction effects of board independence and the top management team’s external ties on firm performance. Using a multiyear sample of firms, we found that outsider-rich boards improved firm performance when they worked with top managers imported from outside the focal industry. On the other hand, a high proportion of outsiders on the board and top managers imported from the focal industry were not a desirable combination for firm performance. The findings imply that researchers and practitioners should pay more attention to identifying the conditions under which board competence aligns with top management.