Friendly Boards and Innovation
57 Pages Posted: 20 Nov 2012 Last revised: 20 Jul 2018
Date Written: March 1, 2017
We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms’ advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.
Keywords: Board of directors, Corporate innovation, Board advising, Social ties, Corporate governance, Firm value
JEL Classification: G34, O32
Suggested Citation: Suggested Citation