Dynamic board capabilities: Developing board practices that impact corporate renewal and performance
Abstract
A crucial requirement for firms to remain competitive is to consistently and simultaneously engage in exploratory and exploitative activities. The academic literature has broadly accepted that the development of dynamic capabilities (ie firms' abilities to create, reconfigure and improve resources and capabilities to fit their changing environments) are vital to meeting this competitive requirement. Research has predominately addressed these dynamic capabilities from a management perspective. Little attention has been paid to the influence of the board of directors on these firm capabilities even though boards hold the fiduciary responsibility for the corporation and its long-term viability. Even less has been written on how boards ought to organise themselves and develop their dynamic board capabilities to support and govern corporate renewal and performance effectively. This paper aims to start addressing this gap by using two related aims. First, a process framework for board behaviours is proposed that ensures, and supports, a systematic way of building and developing corporate-level dynamic capabilities. Then, evidence is presented and reviewed from a survey of two board member communities which supports the idea that board capabilities are essential for a firm's successful renewal and economic performance, and need to be improved in practice. This framework is closely aligned with well-established components identified by the management literature but differs in having the board as the unit of analysis. A crucial question and action agenda is proposed for boards eager to acquire and develop their dynamic capabilities.
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Author's Biography
Liselotte Engstam with 15 years as Chair and Non-Executive Board Director, following her executive tenure at global tech firms, serves on four listed and two private company boards and two sustainability non-profits. Founder of ThinkTank Digoshen, she is an affiliated academic researcher and co-author of ‘Chair Practices’ and ‘AI Leadership for Boards’. Engstam holds a Master of Science, a Board Director Certification IDP-C INSEAD, as well as being a Fellow at the Institute of Coaching and Salzburg Global, and is globally recognised in corporate governance.
Henrik Forzelius is an experienced director, having held both non-executive and executive roles in leadership positions across international, listed and entrepreneurial companies. Currently, he divides his time as a management consultant while pursuing a PhD at KTH Royal Institute of Technology in Stockholm. His research delves into the impact of boards on firm innovation and strategy renewal. Beyond his academic pursuits, Henrik is a speaker and adviser in the field.
Mats Magnusson is a professor of product innovation engineering at KTH Royal Institute of Technology in Stockholm and a permanent visiting professor at LUISS Guido Carli University in Rome. He has been a visiting professor at several universities abroad, is the Chairman of the Continuous Innovation Network and is active as a consultant on innovation management matters in different organisations. His research deals with strategic and organisational aspects of innovation, primarily in technology-intensive organisations.
Fernanda Torre is the CEO of Next Agents, working at the intersection of innovation and sustainability. She is affiliated with the House of Innovation at the Stockholm School of Economics and is a faculty member at the Stockholm School of Entrepreneurship. Torre is the Operations Director for the Boards Impact Forum, the Nordic chapter for the World Economic Forum's Climate Governance Initiative, serves on the board of two non-profits and is the co-author of ‘AI Leadership for Boards’.
Ludo Van Der Heyden joined INSEAD in 1988 from the Yale School of Organization and Management. He has been the INSEAD Chair Professor in Corporate Governance since October 2010 and became Emeritus in 2018. He has co-authored the book ‘Value Creation for Owners and Directors’ (published by Palgrave Macmillan in 2023). He is the Chairman of a software company and a member of the Supervisory Board of Naftogaz in Ukraine and co-created the first educational programme for the Ukrainian Corporate Governance Academy.
Citation
Engstam, Liselotte, Forzelius, Henrik, Magnusson, Mats, Torre, Fernanda and Heyden, Ludo Van Der (2024, March 1). Dynamic board capabilities: Developing board practices that impact corporate renewal and performance. In the Journal of Risk Management in Financial Institutions, Volume 17, Issue 2. https://doi.org/10.69554/RPCL1575.
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