Board cognitive skills, digital transformation and firm performance

Abstract

This research explores how the information technology capabilities of board directors contribute to firm performance. Using a multisectoral sample of 3752 observations from 2008 to 2021, comprising 268 companies listed in the S&P 500 index, a discontinuous growth model was applied to analyze firm performance over time in relation to the inclusion of technology directors on the board. The analysis supports that the inclusion of a technology director on the board is associated with a significant and positive incremental effect on firm performance in the years following the appointment. It suggests that the impact of technologies on digital transformation (DT) extends beyond the implementation of specific tools; directors’ IT skills may initiate the DT process, with its origin occurring at a higher level than the top management team (TMT). In practice, our study suggests that the inclusion of technology director on the board be considered when a DT process is pursued to support the corporation's sustainable competitive advantage.