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C-suites are filled with strong personalities that can help drive new and exciting offerings. But when it comes to breakthrough technological innovations, a new study published in Strategic Management Journal found it's essential that CEO overconfidence is balanced by a board of directors with expertise and power.

To examine their hypotheses, the team used a sample of U.S. publicly listed firms within the S&P 1500 that operate in high-tech industries, as previous research has shown that breakthrough innovations—defined as something that significantly alters or creates markets—are especially important in these environments.

They focused on two board qualities: expertise and power. The importance of expertise is well studied in other areas such as acquisitions: Firms with boards that have experience in acquiring businesses make better decisions in this avenue. Having experience with breakthrough innovations is crucial, as it can help—for example—to ally investment concerns that board members might otherwise have.

Board power was measured in relation to how much independent sway the board has in relation to the CEO. This would be a board where the CEO is not the chair, or where board members have more tenure with the company than the CEO, or when members have a significant stake in the company. These board members are more likely to put pressure on the CEO to prove an idea is worth pursuing, and to ensure all necessary information is provided.

"The powerful board is necessary to make these adjustments or to rectify some misperceptions that may come with this overconfidence," Kraft says.

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