Recent research from Binghamton University and the State University of New York suggests that companies benefit from appointing board directors with international professional backgrounds, provided the existing board functions as a cohesive team. This insight is precious for multinational firms aiming to translate the global experiences of their executives into tangible financial improvements. Andre Havrylyshyn, the assistant professor of strategic management who led this study, emphasized that directors with diverse global experiences can bring innovative strategies and ideas that might not be immediately apparent to their competitors. However, he stressed the importance of team cohesion, as the board’s infrequent meetings necessitate a robust and unified approach to be effective.

The study evaluated 105 U.S. manufacturing firms from 2010 to 2014, using accounting-based metrics like return on assets and broader stock market performance indicators. It highlighted that international exposure allows directors to understand various societal, organizational, and managerial differences, enriching their perspective and enhancing their contribution to strategic board discussions. This broader viewpoint enriches the strategic discussions at the board level and improves the decision-making processes, ultimately benefiting the company’s strategic direction and financial performance.

However, Havrylyshyn noted that the positive impact of internationally experienced directors is most pronounced when it complements an existing team dynamic characterized by cohesion. This synergy between a collective vision and diverse experiences fosters superior decision-making, which, in turn, leads to better overall company performance. The study also found that other factors typically important in team dynamics, such as knowledge sharing and social capital, had little impact on performance outcomes when the board included directors with international experience, suggesting that global experience alone is not a cure-all for boosting profitability.

Further insights from the study revealed that the effectiveness of international experience varies significantly depending on its application within different team structures across the organization. Directors with international backgrounds often have extensive networks and access to a wide range of resources, which can enhance a firm’s strategic capabilities. However, the real challenge lies in integrating these experiences within the team’s existing dynamics to foster an environment conducive to shared understanding and mutual respect.

Havrylyshyn advocated for a shift in focus towards fostering better interpersonal relationships within boards, emphasizing that the presence of skill and talent is only sufficient if the board members gel well together. He suggested that addressing relational dynamics and ensuring effective collaboration among directors could significantly impact the firm’s success more than the accumulation of quantifiable skills.

In conclusion, the research underscores the need for companies to not only seek directors with international experience but also to cultivate a board environment that emphasizes teamwork and cohesion. By doing so, firms can harness the full potential of their directors’ global insights, leading to more informed decision-making and improved financial outcomes. This strategic approach to board composition and team dynamics, as advocated by Havrylyshyn, could lead to profound and positive changes in how companies operate at the highest levels, ensuring that they remain competitive and resilient in a globalized market.

More information: Andre Havrylyshyn et al, The Role of Emergence in Leveraging the Value of Board Director International Experience, Journal of Business and Management. DOI: 10.1504/JBM.2024.141306

Journal information: Journal of Business and Management Provided by Binghamton University