New research from Binghamton University, State University of New York, reveals that companies perform better when they hire board directors with international professional experience—provided that the existing board members work well together as a team.
The study’s insights could guide multinational firms in ensuring that the international experience of their directors translates into improved financial performance.
International exposure
“Exposure to different cultures and business environments can provide fresh perspectives that competitors might overlook,” the researchers note. “However, since boards of directors don’t meet as frequently as other workplace teams, it’s crucial that they function cohesively.”
The research examined 105 U.S. manufacturing firms from 2010 to 2014, measuring their performance using both return on assets and stock market indicators. The study found that international work experience, whether in the public or private sector, allows directors to learn from different societal contexts, enriching their decision-making approaches.
“We found that having more directors with international experience leads to better firm performance, but only when the board operates as a cohesive unit,” the authors explain. “It makes sense: when everyone is working together and leveraging the diverse experiences of those who have worked abroad, decision-making improves, which can boost profitability.”
Team success
Interestingly, the study found that other factors often linked to team success, such as knowledge sharing or social capital, did not significantly impact firm performance, even when boards included internationally experienced directors. This underscores that international experience alone isn’t a surefire way to boost profits.
The researchers suggest that the key to creating effective teams might differ depending on whether you’re looking at the frontline versus the upper echelons of the organization, and it’s essential to consider who is in these teams.
Directors with international experience likely bring a broader network of influential contacts and international resources that firms can tap into. However, the research suggests that focusing on interpersonal relationships might be just as important as quantifiable skills.
“You want board members with talent and experience, but if they can’t work together effectively, addressing those interpersonal dynamics could make a significant difference,” the researchers conclude.
