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Group Polarization in Board Decisions about Strategic Change: Evidence from Chinese Publicly Listed Companies (2008–2018)

Published online by Cambridge University Press:  30 March 2023

Ming Zhang Open the ORCID record for Ming Zhang [Opens in a new window] ,
Xufei Ma Open the ORCID record for Xufei Ma [Opens in a new window] ,
Weihong Chen  and
Hailin Lan
Ming Zhang
Affiliation:
South China University of Technology, China
Xufei Ma*
Affiliation:
Tsinghua University, China Chinese University of Hong Kong, Hong Kong
Weihong Chen
Affiliation:
Guangxi University, China
Hailin Lan
Affiliation:
South China University of Technology, China
*
Corresponding author: Xufei Ma (maxufei@gmail.com)
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Abstract

Strategic management scholars have shown increasing interest in explaining strategic change from the perspective of cognitive bias. However, most studies focus on individual cognitive bias but pay little attention to group cognitive bias. This study introduces a typical group cognitive bias (group polarization) to explain strategic change decisions made by the board of directors. Following the theory of group polarization, we argue that, when the average prior strategic change experienced in performance decline by board directors is relatively high (or low), the focal strategic change in performance decline will become even higher (or lower). We further contend that the proportion of female directors and board versus CEO power as the contingencies can mitigate this group polarization effect. Our hypotheses were strongly supported by a longitudinal sample of Chinese publicly listed companies during 2008–2018. The study's framework and findings contribute to the contextualization of social psychology research on group polarization in the study of board's strategic decision-making.

Keywords

board decisionsboard versus CEO powerfemale directorsgroup polarizationgroup processesstrategic change
Type
Article
Information
Management and Organization Review , Volume 19 , Issue 2 , April 2023 , pp. 201 - 232
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

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Footnotes

ACCEPTED BY Senior Editor Till Talaulicar

References

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