Board Networks and Corporate Innovation
64 Pages Posted: 31 Jan 2017 Last revised: 16 Sep 2017
Date Written: September 1, 2017
This paper studies whether board connectedness affects corporate innovation. We find that well-connected boards have a positive impact on innovation activities and quality. The effect is stronger when firms have higher advising demand or face more severe agency problems. We show that the positive relation is causal and robust, based on a battery of empirical tests including exogenous variation in board connectedness resulting from death and retirement of directors and from a regulatory shock from new exchange listing rules. We also provide evidence that types and relatedness of connections, as well as director characteristics, contribute to cross-sectional heterogeneity of the positive effect.
Keywords: Board network, Innovation, Directors, Monitoring, Advising
JEL Classification: G30, G34, L14, O31
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