Exploring processes in Spanish, German and UK boards: a measurement framework of board know-how, board diversity and directors’ interactions interrelation

Abstract

Purpose Several empirical attempts have investigated boardroom processes and their impact on the governing team decision-making. Such attempts, however, have derived in inchoate results opening new methodological debates and leaving the underlying patterns of board processes obscure. This paper aims to shed light on these patterns by empirically examining the interrelation among the three central constructs involved in board decision-making: know-how, demographic diversity and directors’ social interactions. Design/methodology/approach A framework of interrelation among know-how, demographic diversity and social interactions was conceptually built and empirically validated with partial least squares structural equation modelling applied to archival data from a sample of 87 boards of directors of Spanish, German and UK listed companies. Findings Results unmask the intricacies of behavioural processes involved in know-how-demography relation: demographic diversity contribution to know-how is totally and positively mediated by directors’ social interactions. This reveals the power of directors’ socialization frequency in determining processes and predicting know-how. Practical implications The paper offers a new pathway to manage board know-how and to make board diversity effective. It also opens a door to an innovative empirical methodology to make board processes emerge, one that overcomes methodological limitations of previous efforts. Originality/value This is so far the only study that examines and measures holistically the structural interrelation among the three central constructs determining board decisions and performance: know-how, diversity and social interactions.