Board Heterogeneity, Corporate Diversification and Firm Performance

While board heterogeneity would lead to higher decision quality due to the interaction of multiple perspectives, experiences, and behaviors, heterogeneity can also result in inefficiencies in board's strategic decision-making processes. Our empirical investigation using a sample of 313 Fortune 1000 firms reveals that task-related heterogeneity in board tenure and functional experience contribute to firm performance as corporations are engaged in higher levels of unrelated diversification. Other nontask- related heterogeneity dimensions such as age and educational background have little impact on firm performance in the strategic context of unrelated diversification. The results emphasize the importance of fit between board heterogeneity and strategic context of the corporation.