How product market competition and complexity influence the on-job-learning effect and entrenchment effect of board tenure

The on-job-learning effect implies a positive relationship between firm performance and board tenure. The entrenchment effect implies a negative relationship instead. We document a hump-shaped relationship between board tenure and firm performance. The hump-shaped relationship is eased by competition and complexity. Competition reduces the need of board monitoring while complexity raises the need of board advising leading to the dominance of on-job-learning effect over entrenchment effect and a positive relationship between board tenure and firm performance. The propensity for fraud and stock performance of M&As are non-linearly related to board tenure because of the combination of on-job-learning and entrenchment effects.