An Empirical Analysis of Board Effectiveness on Entrepreneurial Orientation with the Moderating Effect of Corporate Culture in Sri Lankan Listed Non- Financial Companies

With the notable incidents of corporate scandals around the world made authorities search light on effectiveness of the board of directors rather focus only on basic governance compliance rules. On the other hand, lack of innovativeness, risk taking and proactiveness embedded in the operational processes of the organizations may act as the reason for corporate
failures. Therefore, an existence of an effective, well knowledgeable, committed and involved board of directors who are entrepreneurially oriented will be able to establish an effective governance mechanism within the organization and at the same time will be able to gain a sustainable
competitive advantage by sailing the company for the right direction in this challenging, dynamic environment. Organizations’ can address on dynamic environmental challenges by scrutinizing the organizational governance mechanisms and ensuring an alignment with the vision, mission, goals,
objectives and strategies through an effective well-structured board of directors along with management that can monitor, direct and support for the entrepreneurial initiatives to achieve a sustainable competitive advantage. Accordingly, drawing attention to the multi-theoretical perspective in corporate governance and resource base view of entrepreneurship study identifies
board effectiveness in predicting entrepreneurial orientation (innovativeness, proactiveness, risk taking, competitive aggressiveness, and autonomy) with the control variables of organization age and size. Further, to that recognizing the role of corporate culture (clan, adhocracy, hierarchical, market) in shaping the organizational behaviour and effectiveness, its moderating effect on the association between board effectiveness and entrepreneurial orientation is also addressed in the study. Adopting a quantitative survey research strategy, the data collection is carried out from board members and senior decision makers represented top 100 publicly quoted companies registered under Colombo Stock Exchange, except Banking, Finance and Insurance Sector based on highest
market capitalization, Sri Lanka by means of a self-administered structured questionnaire and annual reports. After a careful analysis carried out performing tests on measures on central tendency, mean differences, correlation and hierarchical regression analysis, it is empirically supported that the level of board effectiveness in Sri Lankan listed companies is higher to the
neutral value (3.41), and the level of entrepreneurial orientation in listed companies in Sri Lanka is at a position slightly higher to the neutral value (5.05) when measured using board effectiveness index and a seven point Likert scale for entrepreneurial orientation. Accordingly, entrepreneurial orientation in Sri Lankan listed companies is significantly (p<.05) predicted by board effectiveness.
Moreover, the significant moderation effect of corporate culture (clan and hierarchical) on the association between board effectiveness and innovativeness and risk taking is identified. Thereby, the study draws the attention of the authorities and policy makers to incorporate entrepreneurial characteristics for the established large scale organizations in achieving sustainable competitive
advantages while nurturing the internal organizational cultural values via entrepreneurial attitudes.