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Effects and mechanisms of board faultlines on decision quality

Yaowei Zhang (Business School, Nankai University, Tianjin, China)
Tiantian Cao (Business School, Nankai University, Tianjin, China)
Siqi Liu (Business School, Nankai University, Tianjin, China)
Shuqi Chen (Leeds University Business School, Leeds, UK)

American Journal of Business

ISSN: 1935-5181

Article publication date: 19 January 2024

Issue publication date: 27 May 2024

92

Abstract

Purpose

The inconsistent results shown in previous group faultline research have created a need for investigating the underlying mechanisms of the faultline's effects. This study focuses on clarifying the competing mediating roles of information diversity and team conflict in the nonlinear relationship between board faultlines (BF) and decision quality.

Design/methodology/approach

This study is empirically tested with the questionnaire data from 105 Chinese listed companies.

Findings

This study finds: (1) an inverted U-shaped curve relationship between BF and board decision quality and (2) that the joint mediating effect of team conflict and information diversity leads to the inverted U-shaped curve relationship between BF and decision quality. Specifically, BF shows a U-shaped curve relationship with team conflict and an inverted U-shaped curve relationship with information diversity. Either too weak or too strong faultlines will inhibit the positive effects of information diversity and amplify the negative effects of team conflicts, leading to low-quality decisions.

Originality/value

This study contributes to the research on: (1) board governance as it clarifies the effect of BF on the board decision-making process and its quality, which helps to open the black box of board decision-making and (2) group faultlines as it reveals how information diversity and team conflict can play a joint mediating role in the functioning of team faultlines.

Keywords

Acknowledgements

The authors would like to thank the General Program of National Natural Science Foundation of China (71572081 and 72174096) and the Fundamental Research Funds for the Central Universities (63212119) for their support.

Citation

Zhang, Y., Cao, T., Liu, S. and Chen, S. (2024), "Effects and mechanisms of board faultlines on decision quality", American Journal of Business, Vol. 39 No. 2, pp. 96-114. https://doi.org/10.1108/AJB-03-2023-0050

Publisher

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Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

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