Board Experiential Diversity and Corporate Radical Innovation
Forthcoming, Strategic Management Journal, 1– 24, http://doi.org/10.1002/smj.3499
55 Pages Posted: 23 Aug 2021 Last revised: 17 Apr 2023
Date Written: March 8, 2023
Abstract
How does board experiential diversity affect corporate radical innovation? We find that the combined diversity of directors’ educational, industrial, and organizational experiences spurs the quantity and quality of path-breaking patents developed at a firm. Instrumental variable analysis leveraging exogenous variation in firm access to the non-local supply of directors with diverse experiences indicates causality, which is corroborated by difference-in-differences tests. Firm heterogeneity suggests experientially diverse directors spur radical innovation by better serving the firm’s advisory needs rather than via improved governance. Our findings enrich theoretical insights into how corporate board leadership may affect innovation and long-term value creation at the firm.
Keywords: experiential diversity; radical innovation; board advising; instrumental variable; panel data
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