Do Board Interlocks Increase Innovation? Evidence from a Corporate Governance Reform in India

71 Pages Posted: 13 Aug 2013 Last revised: 3 Apr 2017

See all articles by Christian Helmers

Christian Helmers

Santa Clara University - Leavey School of Business; Universidad Carlos III de Madrid

Manasa Patnam

CREST (ENSAE)

P. Raghavendra Rau

University of Cambridge

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2017

Abstract

We examine the effect of board interlocks on patenting and R&D spending for publicly traded companies in India. We exploit a corporate governance reform to address the endogeneity of board interlocks through exogenous changes mandated by the reform requiring a subset of firms to adjust their board structure. We rely on two difference-in-differences frameworks, comparing firms affected by the reform to unaffected firms as well as comparing within the set of firms that did not have to adjust their board structure those that still experienced an exogenous increase of their network size as a result of the reform to those that did not experience a change in their network size. We find that board interlocks have significant positive effects on both R&D and patenting. The evidence suggests that the impact on R&D is induced by information transmission through interlocks. The effect on patenting is driven by firms extending patent protection by patenting inventions abroad that they have already patented in India.

Keywords: Patents, peer effects, director networks, innovation, India, natural experiments

JEL Classification: G3, O16, O34, O31

Suggested Citation

Helmers, Christian and Patnam, Manasa and Rau, P. Raghavendra, Do Board Interlocks Increase Innovation? Evidence from a Corporate Governance Reform in India (April 1, 2017). Available at SSRN: https://ssrn.com/abstract=2309082 or http://dx.doi.org/10.2139/ssrn.2309082

Christian Helmers

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Manasa Patnam (Contact Author)

CREST (ENSAE) ( email )

92245 Malakoff Cedex
France

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

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