The current paper addresses a two-fold research question: Do corporate governance mechanisms in general and boards of directors in particular affect firm-level competitive behavior? If yes, in what manner do the relationships hold?

We consider boards as human groups in the uppermost echelon of corporations and examine how an informal hierarchy that tacitly forms among a firm's directors affects firm financial performance. This informal hierarchy is based on directors' deference for one another. We argue that the clarity of...