Job-related diversity: the comprehensiveness and speed of board decision-making processes—an upper echelons approach

Strategic decision-making processes influence firm-level outcomes. Using the theory of upper echelons, this study investigates how diversity in directors’ skills, knowledge, and industry experience influence board decision-making processes that may impact overall strategic decision-making processes. Such diversity has been commonly accepted to be a ‘double-edged sword’—enhancing comprehensiveness but hindering the speed of decision-making. On the contrary, we used an existing large survey database to show that directors’ diverse educational background, functional background, and industry experience (job-related diversity) have a positive effect on comprehensiveness as well as the speed of board decision-making. In addition, our results indicate that board processes (directors’ use of their knowledge and skills) play an important role by transmitting the positive effects of diversity. The study is in a tradition of exploring how boards may influence firms’ strategic decision-making processes. Our findings provide additional arguments for adding job-related diversity to boards of directors. © 2017, Springer Science+Business Media, LLC.