Groups with a greater proportion of domain experts are less likely to alter their perspectives as the environment changes.
But these boards differ substantially in the proportion of domain-expert directors: while the majority (56 per cent) of the first board is composed of solar-industry experts, such directors are a minority (22 per cent) in the second board. Most previous studies on board and executive team diversity have not distinguished experts from non-experts within a given domain, and hence cannot answer the question of how domain experts affect a firm’s performance.
Previous research indicates that when the level of decision uncertainty is high, three negative characteristics of domain-expertise are more likely to be present and to undermine effective decision making:
Decision-making groups with a greater COGNITIVE ENTRENCHMENT. proportion of domain experts are less likely to recognize, interpret, and integrate new information or to alter their perspectives as the environment changes. In the solar energy industry, for example, management teams in which the majority of executives were domain experts were found to be less flexible than other teams in implementing technological changes to respond to environmental shifts.
Consistent with this finding, scholars have highlighted a tendency of individual domain experts for ‘cognitive entrenchment’ — that is, a high degree of stability in their framing of problems and issues. If domain experts dominate the collective framing and discussion of problems and opportunities in a decision-making group, this tendency for cognitive entrenchment can make it more difficult for the group to recognize and flexibly react to new information.
A greater proportion of domain expertise has OVER-CONFIDENCE. also been associated with a higher level of group over-confidence.