The Double-Edged Nature of Board Gender Diversity: Diversity, Firm Performance, and the Power of Women Directors as Predictors of Strategic Change

Abstract

Diverse boards have been seen as providing impetus for initiating change. However, diversity may introduce conflict and impede decision-making, which could hinder the ability of the firm to make strategic change, especially in times when firm performance is low. Integrating threat-rigidity theory and team diversity research, we examine how board gender diversity, firm performance, and the power of women directors interact to influence the amount of strategic change. Results support a three-way interaction, indicating that when the board is not experiencing a threat due to low firm performance and women directors have high power, the relationship between board gender diversity and amount of strategic change is the most positive. However, when the board is threatened by low firm performance and women directors have high power, the relationship between board gender diversity and amount of strategic change is the most negative. Results suggest that diversity is double-edged in nature because it can propel or impede strategic change depending on firm performance and the power of women directors.

Keywords: diversity, boards, board of directors, gender diversity, power, governance, strategic change