Translating Innovation into Performance: Understanding Role of the Board

Abstract

Innovation enables firms to face increasing competition in the global environment, but there is variation in innovation investments across firms due to the inherent uncertainty involved in innovative activities. The strategic role of board, therefore, becomes crucial in overseeing innovation decisions. This study, hence, examines whether the relation between R&D investment and firm’s performance would vary based on the board characteristics of the company. It empirically explores this interrelationship in publicly listed Indian companies, by assessing the moderation effect of board using fixed effect regression analysis and conditional effects on a panel data of 9,031 firm years across twelve years. Board size, board meetings, proportion of women director and board leadership are found to negatively moderate the relationship between innovation and financial performance (ROE), however none of them moderates the relation between innovation and firm value (Tobin’s Q). It signifies that though board characteristics play an important role in relationship between innovation and ROE, investors fail to recognise it. Companies should focus on creating the right kind of board, investors must appreciate board’s influence in the success of R&D investments without being driven by mere compliance. Policy makers should deliberate upon the desirability of present structure of stringent laws.

Board diversity and firm innovation: a meta-analysis

“…Also the conducted empirical literature repeats this uncertainty: even the most recent studies on the topic still show mixed evidence with either negative, positive or insignificant results (e.g. Hern ander-Lara and Gonzales-Bustos, 2019Gonzales-Bustos et al, 2020;Liu et al, 2020;Manita et al, 2020;Martinez-Jimenez et al, 2020;Rejeb et al, 2020;Vaivaran and Zhang, 2020;Jhunjhunwala et al, 2021;Luo et al, 2021;Zhong et al, 2021). Therefore, meta-analysis methodology seems particularly suitable for investigating this uncertainty.…”

University board composition and institutional outcomes

“…As a result, researchers often turn to nationality in measuring ethnic and/or racial diversity (Masulis et al, 2012; Oxelheim & Randoy, 2003). The scant empirical evidence on the impact of ethnic diversity suggests that it has a positive impact on firm performance (Jhunjhunwala & Mishra, 2012).…”

“…One would expect that the practice of self‐perpetuating boards would lead to lower levels of minority and female representation and more alumni filling board seats. Additionally, it is expected that greater representation of particular groups (women, minorities, alumni, and faculty) would lead to improvements in institutional outcomes, particularly in metrics that are of interest to that group (Jhunjhunwala & Mishra, 2012). For example, faculty may be interested in enrolling more academically qualified students, while alumni may be interested in increasing the value of their degree by improving the external metrics of university performance, such as university rankings.…”

Diverse boards and firm performance: The role of environmental, social and governance disclosure

“…Thus, age diversity enhances firm performance (Mahadeo et al, 2012). Similarly, boards predominantly comprised of young people tend to have access to cutting‐edge technology and relate to higher education (Jhunjhunwala & Mishra, 2012).…”