Endowed with significant firm‐specific knowledge, inside directors can contribute to the decision‐making processes of the boardroom. However, regulatory changes, focusing primarily on the monitoring function of the boards, have driven inside directors out of the boardroom. This article argues that suppliers with firm‐ and industry‐specific knowledge are uniquely positioned to fill a critical void in boardrooms. It also suggests that the value of having a supplier on the board (SOTB) is influenced by environmental contingencies faced by a firm: operational efficiency, diversification, and demand uncertainty. Using an objective measure of supplier presence in the boardroom, the authors find that a supplier's presence enhances firm performance. They also find that the value of an SOTB in enhancing performance is greater in firms with lower operational efficiency and higher demand uncertainty and, is lower in firms with higher diversification. These results are robust to potential endogeneity issues, alternative estimation methods, and measures of moderator and outcome variables.
AngkiriwangR.PujawanI. N.SantosaB. (2014). Managing uncertainty through supply chain flexibility: Reactive vs. proactive approaches. Production & Manufacturing Research, 2(1), 50–70.
2.
AmbulkarS.RamaswamiS.BlackhurstJ.Johnny RungtusanathamM. (2022). Supply chain disruption risk: An unintended consequence of product innovation. International Journal of Production Research, 33–34, 1–20. https://doi.org/10.1080/00207543.2022.2027038
3.
BaeJ.KimS. J.OhH. (2017). Taming polysemous signals: The role of marketing intensity on the relationship between financial leverage and firm performance. Review of Financial Economics, 33, 29–40. https://doi.org/10.1016/j.rfe.2016.12.002
4.
BlauP. M. (1977). Inequality and heterogeneity: A primitive theory of social structure. The Free Press.
5.
BavafaH.TerwieschC. (2019). Work after work: The impact of new service delivery models on work hours. Journal of Operations Management, 65(7), 636–658. https://doi.org/10.1002/joom.1052
6.
BavafaH.HittL. M.TerwieschC. (2018). The impact of e‐visits on visit frequencies and patient health: Evidence from primary care. Management Science, 64(12), 5461–5480. https://doi.org/10.1287/mnsc.2017.2900
7.
BommarajuR.AhearneM.KrauseR.TirunillaiS. (2019). Does a customer on the board of directors affect business‐to‐business firm performance?Journal of Marketing, 83(1), 8–23. https://doi.org/10.1177/0022242918815894
8.
BoivieS.WithersM. C.GraffinS. D.CorleyK. G. (2021). Corporate directors' implicit theories of the roles and duties of boards. Strategic Management Journal, 42(9), 1662–1695. https://doi.org/10.1002/smj.3320
9.
BowenF. E.CousinsP. D.LammingR. C.FaruktA. C. (2001). The role of supply management capabilities in green supply. Production and Operations Management, 10(2), 174–189. https://doi.org/10.1111/j.1937‐5956.2001.tb00077.x
10.
BrinkhoffA.ÖzerÖ.SargutG. (2015). All you need is trust? An examination of inter‐organizational supply chain projects. Production and Operations Management, 24(2), 181–200. https://doi.org/10.1111/poms.12234
11.
CarpenterM. A.SandersW. G. (2002). Top management team compensation: The missing link between CEO pay and firm performance?Strategic Management Journal, 23(4), 367–375. https://doi.org/10.1002/smj.228
12.
CarpenterM. A.WestphalJ. D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management Journal, 44(4), 639–660.
13.
CastellanosJ. D.GeorgeB. (2020). Boardroom leadership: The board of directors as a source of strategic leadership. Economics and Business Review, 6(1), 103–119. https://doi.org/10.18559/ebr.2020.1.5
14.
ChengJ. Y. J.GroysbergB.HealyP.VijayaraghavanR. (2021). Directors’ perceptions of board effectiveness and internal operations. Management Science, 67(10), 6399–6420. https://doi.org/10.1287/mnsc.2020.3789
CraigheadC. W.BlackhurstJ.RungtusanathamM. J.HandfieldR. B. (2007). The severity of supply chain disruptions: Design characteristics and mitigation capabilities. Decision Sciences, 38(1), 131–156. https://doi.org/10.1111/j.1540‐5915.2007.00151.x
17.
DaltonD. R.DailyC. M.JohnsonJ. L.EllstrandA. E. (1999). Number of directors and financial performance: A meta‐analysis. Academy of Management Journal, 42(6), 674–686.
DessG. G.BeardD. W. (1984). Dimensions of organizational task environments. Administrative Science Quarterly, 52–73. https://doi.org/10.2307/2393080
20.
FamaE. F.JensenM. C. (1983). Agency problems and residual claims. The Journal of Law and Economics, 26(2), 327–349. https://doi.org/10.1086/467038
21.
FeldmanE. R.MontgomeryC. A. (2015). Are incentives without expertise sufficient? Evidence from Fortune 500 firms. Strategic Management Journal, 36(1), 113–122. https://doi.org/10.1002/smj.2211
22.
FernandezW. D.ThamsY.LehrerM. (2019). What does board capital really bring to the table?American Journal of Business, 34(3/4), 134–147. https://doi.org/10.1108/AJB‐09‐2018‐0050
23.
FrankeH.EckerdS.FoerstlK. (2021). Rising to the top: Motivational forces influencing status conflict in sourcing teams. Production and Operations Management, 31(3), 963–983.
24.
GoddardJ.ManoucheT.WilsonJ. (2005). Determinants of profitability in European manufacturing & services: Evidence from a dynamic panel model. Applied Financial Economics, 15(18), 1269–1282.
25.
GuestP. M. (2009). The impact of board size on firm performance: Evidence from the UK. The European Journal of Finance, 15(4), 385–404. https://doi.org/10.1080/13518470802466121
26.
HambrickD.CannellaA.Jr. (2004). CEOs who have COOs: Contingency analysis of an unexplored structural form. Strategic Management Journal, 25(October), 959–979. https://doi.org/10.1002/smj.407
27.
HarjotoM.LaksmanaI.LeeR. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641–660. https://doi.org/10.1007/s10551‐014‐2343‐0
28.
HarrisonD. A.SinH.‐P. (2006). What is diversity and how should it be measured? In KonradA. M.PrasadP.PringleJ. K. (Eds), Handbook of workplace diversity (pp. 191–216). Sage.
29.
HeckmanJ.Navarro‐LozanoS. (2004). Using matching, instrumental variables, and control functions to estimate economic choice models. Review of Economics and Statistics, 86(1), 30–57. https://doi.org/10.1162/003465304323023660
30.
HendersonA. D.MillerD.HambrickD. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, & company performance. Strategic Management Journal, 27(5), 447–460.
31.
HendricksK. B.SinghalV. R. (2014). The effect of demand–supply mismatches on firm risk. Production and Operations Management, 23(12), 2137–2151. https://doi.org/10.1111/poms.12084
32.
HendricksK. B.HoraM.SinghalV. R. (2015). An empirical investigation on the appointments of supply chain and operations management executives. Management Science, 61(7), 1562–1583. https://doi.org/10.1287/mnsc.2014.1987
33.
HillmanA. J.DalzielT. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383–396. https://doi.org/10.2307/30040728
34.
HillmanA. J.WithersM. C.CollinsB. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404–1427. https://doi.org/10.1177/0149206309343469
35.
ImaiK.KimI. S. (2019). When should we use unit fixed effects regression models for causal inference with longitudinal data?American Journal of Political Science, 63(2), 467–490. https://doi.org/10.1111/ajps.12417
36.
JacobsM. A.SwinkM. (2011). Product portfolio architectural complexity and operational performance: Incorporating the roles of learning and fixed assets. Journal of Operations Management, 29(7‐8), 677–691. https://doi.org/10.1016/j.jom.2011.03.002
37.
JinY.HuQ.KimS. W.ZhouS. X. (2019). Supplier development and integration in competitive supply chains. Production and Operations Management, 28(5), 1256–1271. https://doi.org/10.1111/poms.12984
38.
JosephJ.OcasioW.McDonnellM. H. (2014). The structural elaboration of board independence: Executive power, institutional logics, and the adoption of CEO‐only board structures in U.S. corporate governance. Academy of Management Journal, 57(6), 1834–1858. https://doi.org/10.5465/amj.2012.0253
39.
KastielK.NiliY. (2017). Captured boards: The rise of super directors and the case for a board suite. Wisconsin Law Review, 1, 19.
40.
KeatsB. W.HittM. A. (1988). A causal model of linkages among environmental dimensions, macro‐organizational characteristics, & performance. Academy of Management Journal, 31(3), 570–598.
41.
KovachJ. J.HoraM.ManikasA.PatelP. C. (2015). Firm performance in dynamic environments: The role of operational slack & operational scope. Journal of Operations Management, 37, 1–12.
42.
KingA.LenoxM. (2002). Exploring the locus of profitable pollution reduction. Management Science, 48(2), 289–299. https://doi.org/10.1287/mnsc.48.2.289.258
43.
KrauseR.SemadeniM.CannellaA. A.Jr (2013). External COO/presidents as expert directors: A new look at the service role of boards. Strategic Management Journal, 34(13), 1628–1641. https://doi.org/10.1002/smj.2081
44.
LarckerD. F.SoE. C.WangC. C. (2013). Boardroom centrality and firm performance. Journal of Accounting and Economics, 55(2‐3), 225–250. https://doi.org/10.1016/j.jacceco.2013.01.006
45.
LeeJ. (2009). Does size matter in firm performance? Evidence from U.S. public firms. International Journal of the Economics of Business, 16(2), 189–203. https://doi.org/10.1080/13571510902917400
46.
LoC. K.YeungA. C.ChengT. C. E. (2009). ISO 9000 and supply chain efficiency: Empirical evidence on inventory and account receivable days. International Journal of Production Economics, 118(2), 367–374. https://doi.org/10.1016/j.ijpe.2008.11.010
47.
LungeanuR.ZajacE. J. (2019). Thinking broad and deep: Why some directors exert an outsized influence on strategic change. Organization Science, 30(3), 489–508. https://doi.org/10.1287/orsc.2018.1258
48.
McKone‐SweetK. E.HamiltonP.WillisS. B. (2005). The ailing healthcare supply chain: A prescription for change. Journal of Supply Chain Management, 41(1), 4–17. https://doi.org/10.1111/j.1745‐493X.2005.tb00180.x
49.
ModiS. B.MishraS. (2011). What drives financial performance–resource efficiency or resource slack? Evidence from US based manufacturing firms from 1991 to 2006. Journal of Operations Management, 29(3), 254–273. https://doi.org/10.1016/j.jom.2011.01.002
50.
ModiS. B.CantorD. E. (2021). How coopetition influences environmental performance: Role of financial slack, leverage, & leanness. Production and Operations Management, 30(7), 2046–2068.
51.
NamJ.LiuX.LioliouE.JeongM. (2018). Do board directors affect the export propensity and export performance of Korean firms? A resource dependence perspective. International Business Review, 27(1), 269–280. https://doi.org/10.1016/j.ibusrev.2017.08.001
52.
NarasimhanR.KimS. W. (2002). Effect of supply chain integration on the relationship between diversification and performance: Evidence from Japanese and Korean firms. Journal of Operations Management, 20(3), 303–323. https://doi.org/10.1016/S0272‐6963(02)00008‐6
53.
PalepuK. (1985). Diversification strategy, profit performance and the entropy measure. Strategic Management Journal, 6(3), 239–255. https://doi.org/10.1002/smj.4250060305
54.
PapadopoulosK. (2019). U.S. board diversity trends in 2019. ISS Analytics. https://www.issgovernance.com/file/publications/ISS_US‐Board‐Diversity‐Trends‐2019.pdf
55.
PfefferJ.SalancikG. R. (2003). The external control of organizations: A resource dependence perspective. Stanford University Press.
56.
PreacherK. J.CurranP. J.BauerD. J. (2006). Computational tools for probing interactions in multiple linear regression, multilevel modeling, and latent curve analysis. Journal of Educational and Behavioral Statistics, 31(4), 437–448. https://doi.org/10.3102/10769986031004437
57.
RohJ.KrauseR.SwinkM. (2016). The appointment of chief supply chain officers to top management teams: A contingency model of firm‐level antecedents and consequences. Journal of Operations Management, 44(1), 48–61. https://doi.org/10.1016/j.jom.2016.05.001
58.
RothA.RosenzweigE. (2020). Advancing empirical science in operations management research: A clarion call to action. Manufacturing & Service Operations Management, 22(1), 179–190.
59.
SandersonE.WindmeijerF. (2016). A weak instrument F‐test in linear IV models with multiple endogenous variables. Journal of Econometrics, 190(2), 212–221. https://doi.org/10.1016/j.jeconom.2015.06.004
60.
StuartS. (2019). Spencer Stuart board index: A perspective on U.S. boards. Spencer Stuart.
61.
StockJ. H.WrightJ. H.YogoM. (2002). A survey of weak instruments and weak identification in generalized method of moments. Journal of Business & Economic Statistics, 20(4), 518–529.
62.
SwinkM.SchoenherrT. (2015). The effects of cross‐functional integration on profitability, process efficiency, and asset productivity. Journal of Business Logistics, 36(1), 69–87. https://doi.org/10.1111/jbl.12070
63.
TianJ.HaleblianJ.RajagopalanN. (2011). The effects of board human and social capital on investor reactions to new CEO selection. Strategic Management Journal, 32(7), 731–747. https://doi.org/10.1002/smj.909
64.
WathneK. H.HeideJ. B. (2004). Relationship governance in a supply chain network. Journal of Marketing, 68(1), 73–89. https://doi.org/10.1509/jmkg.68.1.73.24037
65.
WhitlerK. A.KrauseR.LehmannD. R. (2018). When and how board members with marketing experience facilitate firm growth. Journal of Marketing, 82(5), 86–105. https://doi.org/10.1509/jm.17.0195
66.
WhitlerK. A.PutoC. P. (2020). The influence of the board of directors on outside‐in strategy. Industrial Marketing Management, 90, 143–154. https://doi.org/10.1016/j.indmarman.2020.07.007
67.
WooldridgeJ. M. (2002). Econometric analysis of cross section and panel data (No. 330.18/W91e), MIT press.
68.
WooldridgeJ. M. (2015). Control function methods in applied econometrics. Journal of Human Resources, 50(2), 420–445. https://doi.org/10.3368/jhr.50.2.420
69.
WowakK. D.BallG. P.PostC.KetchenD. J.Jr (2021). The influence of female directors on product recall decisions. Manufacturing & Service Operations Management, 23(4), 895–913.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
