The Effects of Directors’ Exploratory, Transformative and Exploitative Learning on Boards’ Strategic Involvement: An Absorptive Capacity Perspective

Abstract

While directors' knowledge represents a crucial resource for strategizing on boards, little is known how knowledge of individual directors becomes deployed behind the doors of the boardroom. Drawing on the concept of absorptive capacity, we develop a model that explores how directors' explorative, transformative and exploitative learning affects boards’ strategic involvement. Using large‐scale survey data, our findings indicate that learning helps to explain how directors' knowledge leads to higher levels of strategic involvement. Moreover, we find that learning processes mutually reinforce each other and have complementary effects on boards' strategic involvement. Our study contributes to the board and absorptive capacity literatures by demonstrating that learning processes are interconnected with each other and represent an intermediate way to put directors' knowledge into effective use.