13th Annual International Management Conference Proceeding

Boards, for example, enable the firm to create a network without the full costs of true vertical amalgamation. Resourcepoor
entrepreneurial organizations can achieve required strategic benefits by building network exchange structures with
outsiders who are identified as critical resource suppliers. These relationships can stabilize the new firm in its targeted
markets. It is therefore possible to attach value to these networks in the valuation of intellectual capital. While this view
is consistent with the resource dependence perspective, social network theory emphasizes the importance of network
formation on reputation, trust, reciprocity, and mutual interdependence (Larson, 1992). Thus, for example, our earlier
discussion of resource dependence focuses on the role of the board as facilitating the acquisition of resources. In
contrast, social networks theory considers the predictable paths (based on preexisting relationships) that may be used to
acquire these resources.
Therefore, the social network perspective is closely aligned with other theoretical perspectives. This perspective is
distinct, however, in that it focuses on social networks as the primary predictor of board composition. For example,
Forbes and Milliken (1999) pursued the links between group processes and diversity in the study of the literature
focusing on group dynamics and their effects on board effectiveness. They highlighted such areas as board cohesiveness
and effort norms (ensuring preparation, participation and analysis), cognitive conflict (leveraging differences in
perspective), the presence of knowledge and skills, effects of board processes; job related diversity, other aspects of board
demography (proportion of outsiders, board size, board tenure) and board dynamics across different types of boards.
They concluded that board effectiveness was likely to depend heavily on social-psychological processes, particularly
those pertaining to participation and interaction, the exchange of information, and critical discussion. We disagree with
this perspective, however, because it does not explain the other side of the coin of how the board can help in enhancing
the intellectual capital resources of the firm. This is because there is empirical evidence (Nkundabanyanga, 2006) to
show that actually gender diversity on the board enhances intellectual capital performance of firms.
We contend that this is harmonizable by incorporating intellectual capital as a wider set so we could develop a
comprehensive framework for understanding corporate performance. Accordingly, although social networks have been
posited to play an important role in the formation of boards (Birley, 1985; Khurana, 1996), we believe much greater
elaboration of the impact of boards on firm’s intellectual capital is justified since Intellectual capital is generally
becoming widely accepted as a major corporate strategic asset capable of generating sustainable superior firm
performance (Barney, 1991).
Thus, it can be considered that external governance may not be a necessary condition for controlling managers and that
there should exist some other factors that augment, discipline the management, and ensure the efficient operation of the
firm. Outside the standard agency paradigm, some researchers suggest that managers are controlled more or less inside
the firm. Yet others believe that institutional isomorphism explains board behavior and therefore corporate performance.
It is for this varying utility of agency theory, network theory, resource dependency, and institutional theory in predicting
firm performance, we are proposing a comprehensive framework incorporating gender diversity, intellectual capital, and
CEO celebrity.
Theoretical Framework
The following model describes how gender diversity on the board, intellectual capital, governance mechanisms increase
corporate performance. It shows that governance mechanisms can enhance a CEO’s self-efficacy as also the performance
of intellectual capital can enhance the celebrity of CEO’s. We posit that a CEO’s celebrity and his efficacy enhance his
strategic choices in turn enhancing corporate performance. It predicts that a manager’s strategic choices can lead to both
startling performance and spectacular failures of firms because of his celebrity and self-efficacy. Board diversity,
intellectual capital and governance mechanisms shape a firm’s culture and voluntary disclosure proclivity of firms and
this in turn affects corporate performance. The framework shows some demographic factors as being control variables.
Figure 1: Proposed theoretical model
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