The influence of the board of directors on corporate entrepreneurship: a study of Australian commercial banks

Corporate entrepreneurship, the establishment of new businesses or the renewal of existing ones by an organisation, is increasingly recognised as necessary for a company’s ongoing competitiveness and growth. There are many factors that are likely to influence a company’s commitment to corporate entrepreneurship that are worthy of research. Of these, one that is likely to have significant impact is the role of the board of directors. This leads to the research question 'How does a board of directors influence a company’s corporate entrepreneurship?' This question is addressed in two stages. Firstly, the mechanisms through which boards influence corporate strategy are explored by addressing the question 'How does a board of directors influence a company’s corporate strategy?' Second, the answer to this question is used as a starting point for exploring 'How do a board’s characteristics influence its corporate entrepreneurship?' A case study methodology was adopted with a sample comprising directors from purposively selected publicly listed Australian commercial banks. The data comprised interviews with company directors and published material. Interviews were conducted using a standard interview protocol developed from an a priori specification of construct. The interview data was coded and analysed using qualitative data analysis software and then triangulated with the published material to confirm its validity. The research shows that boards play a significant role in a company’s choice of strategy. They appoint a chief executive who has views that are consistent with their own. They provide guidelines to management to assist its development of a strategic plan that they will be willing to approve. They assess the performance of the management team by monitoring the implementation of this plan. As the basis for most board decisions is not codified, they are made on the basis of a board’s shared judgement. Since boards aim to represent shareholders, their objective is that their decisions will reflect the wishes of the company’s shareholders. While this is a practical objective, the data shows that directors are unsure of shareholder priorities. The solution to this dilemma is for boards to assume that if shareholders buy shares in a conservative bank that pays high dividends and seldom innovates, they would like it to remains so. In the particular case of corporate entrepreneurship, a board’s support depends on it having a shared attitude that corporate entrepreneurship is desirable and a shared perception that it is feasible. A shared attitude that corporate entrepreneurship is desirable appears to be a long-term board value. A shared perception that entrepreneurship is feasible appears to be based on the board’s view as to management’s capabilities.