Strategic Leadership and Multiple Networks: Theory & Evidence

Stakeholder norms originating in developed economies influence firms’ board composition, including board diversity. However, less is known on firms in emerging economies, specifically India—a heterogeneous institutional context where firms’ strategic choices are subject to unique institutional forces and social structures. In his study, we bridge the stakeholder theory with the institutional perspective to examine Indian firms’ strategic choices regarding board caste diversity. Specifically, we contend that Indian firms’ exposure to stakeholder norms from developed economies does increase board caste diversity in India. However, such adaptations can face constraints and opportunities embedded in multiple social structures of India. Our panel regression analyses of three large Indian datasets between 2010 and 2018 suggest that Indian firms’ board caste diversity is indeed driven by their exposures to stakeholder norms from developed economies. Further, such adaptations are strengthened when firms occupy key positions—prominence (centrality) and brokerage—in a network with market-based affiliation (i.e., banks), but are weakened when firms occupy prominence (centrality) and brokerage in a network with a tradition-based affiliation (i.e., family and kinship). As one of the first studies to systematically investigate Indian firms’ board caste diversity, our findings have important implications for corporate governance in emerging economies.