HOW CAN BOARD DIVERSITY PROMOTE CORPORATE INNOVATION? : A SYSTEMATIC LITERATURE REVIEW
Keywords:
Board Diversity, Board Gender, Foreign Director, Board Age, Corporate Innovation
Abstract
Corporate innovation plays a crucial role in companies to remain sustainable in the future. Companies can also encourage the economic strength of a country. Innovative companies can be competitive in the market by improving marketing strategies and product innovation. Therefore, they can improve company performance. The board of directors has the authority to make strategic decisions to determine company performance. Based on the results of collecting 59 pieces of literature and then analyzing them, the researchers can conclude that various board characteristics such as board gender, foreign board, and board age can influence companies to innovate. Female directors can provide valuable insight, knowledge, and skills for companies to innovate to survive in the future. Foreign boards with cross-border knowledge and international relations can implement it into companies to innovate. Young directors have a much more risk appetite and are creative in trying new things.
References
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Cumming, D., Leung, T., 2021. Board diversity and corporate innovation: regional demographics and industry context. Corp. Gov. An Int. Rev. 29, 277–296.
Cuong, L.K., Hau, H.T., 2021. Does innovation promote access to informal loans? Evidence from a transitional economy. Finance Res. Lett. 40. http://dx.doi. org/10.1016/j.frl.2020.101718.
Daily, C.M., Dalton, D.R., 1997. CEO and board chair roles held jointly or separately: much ado about nothing? Acad. Manag. Perspect. 11 (3), 11–20.
Duran, M., 2014. Board directors’ preferences – what are good aggregation rules? Finance Res. Lett. 11 (2), 84–90. http://dx.doi.org/10.1016/j.frl.2014. 02.002
Eisenberg, T., Sundgren, S., Wells, M.T., 1998. Larger board size and decreasing firm value in small firms. J. Financ. Econ. 48 (1), 35–54
Eulerich, M., Velte, P. and van Uum, C. (2013), “The impact of management board diversity on corporate performance”, Problems and Perspectives in Management, Vol. 11 No. 4, pp. 23-37.
Faleye, O., Hoitash, R., Hoitash, U., 2011. The costs of intense board monitoring. J. Financ. Econ. 101, 160–181 firms: a resource-based analysis of the effect of organizational culture. Enterpren. Theor. Pract. 28 (4), 363–379.
Galia, F., Zenou, E., 2012. Board composition and forms of innovation: does diversity make a difference? Eur. J. Int. Manag. 6, 630–650
Golden, B.R., Zajac, E.J., 2001. When will boards influence strategy? Inclination power¼ strategic change. Strat. Manag. J. 22 (12), 1087–1111
Gonzales-Bustos, J.P., Hernandez-Lara, A.B., Li, X., 2017. Board composition in family and non-family innovative businesses. Corp. Ownersh. Control 15 (1), 459–466.
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Gul, F.A., Srinidhi, B., Ng, A.C., 2011. Does board gender diversity improve the informativeness of stock prices? J. Account. Econ. 51, 314–338.
Hambrick, D.C., Mason, P.A., 1984. Upper echelons: The organization as a reflection of its top managers. Acad. Manag. Rev. 9 (2), 193–206.
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Ling, L., Zhou, X., Liang, Q., Song, P., Zeng, H., 2016. Political connections, overinvestments and firm performance: Evidence from Chinese listed real estate firms. Finance Res. Lett. 18, 328–333. http://dx.doi.org/10.1016/j.frl. 2016.05.009.
Makkonen, T., Williams, A., Habersetzer, A., 2018. Foreign board members and firm innovativeness: an exploratory analysis for setting a research agenda. Corp. Gov. Int. J. Bus. Soc. 18, 1057–1073.
Martini, S.B., Corvino, A., Rigolini, A., 2012. Board diversity and investments in innovation: empirical evidence from Italian context. Corp. Ownersh. Control 10, 9–25.
Midavaine, J., Dolfsma, W., Aalbers, R., 2016. Board diversity and R&D investment. Manag. Decis. 54, 558–569
Østergaard, C.R., Timmermans, B., Kristinsson, K., 2011. Does a different view create something new? The effect of employee diversity on innovation. Res. Pol. 40 (3), 500-509.
Pearce, J.A., Zahra, S.A., 1992. Board composition from a strategic contingency perspective. J. Manag. Stud. 29 (4), 411–438.
Perez-Calero, S., Guerrero-Villegas, J., Hurtado, J.M., 2017. The influence of organizational factors on board roles. Manag. Decis. 55 (5), 842–871.
Pfeffer, J. and Salancik, G. (1978), The External Control of Organizations: A Resource-Dependence Perspective, Harper and Rows, New York, NY
Pfeffer, J., Salancik, G.R., 1978. The External Control of Organizations: A Resource Dependence Perspective. Harper & Row, New York.
Post, K., Byron, C., 2015. Women on boards and firm financial performance: a metaanalysis. Acad. Manag. J. 58 (5), 1546–1571.
Rice, M., Tierney, S., O’Hagan, S., Lyons, D. and Green, M. (2012), “Knowledge, influence, and firm-level change: a geographic analysis of boardassociated with Canada’s growing and declining business”, Geoforum, Vol. 43 No. 5, pp. 959-968.
Ruigrok, W., Peck, S., Tacheva, S., Greve, P. and Hu, Y. (2006), “The determinants and effects of board nomination committees”, Journal of Management and Governance, Vol. 10 No. 2, pp. 119-148.
Sila, V., Gonzalez, A., Hagendorff, J., 2016. Women on board: Does boardroom gender diversity affect firm risk? J. Corp. Finance 36, 26–53.
Solheim, M. and Fitjar, R. (2016), “Foreign workers are associated with innovation, but why?”, International Regional Science Review, OnlineFirst, doi: 10.1177/0160017615626217
Stein, J.C., 1988. Takeover threats and managerial Myopia, vol. 96, no. 1. pp. 61–80. http://dx.doi.org/10.1086/261524. structure changes and strategic change. Acad. Manag. J. 34 (2), 306–330.
Tellis, G.J., Prabhu, J.C., Chandy, R.K., 2009. Radical innovation across nations: The preeminence of corporate culture. J. Market. 73 (1), 3–23.
Terjesen, S., Sealy, R., Singh, V., 2009. Women directors on corporate boards: a review and research agenda. Corp. Govern. Int. Rev. 17 (3), 320–337
Wong, P.K., Ho, Y.P., Autio, E., 2005. Entrepreneurship, innovation and economic growth: Evidence from GEM data. Small Bus. Econ. 24, 335–350. http: //dx.doi.org/10.1007/s11187-005-2000-1, 2005
Zahra, S. and Gerard, G. (2002), “Absorptive capacity: a review, reconceptualization, and extension”, Academy of Management Review, Vol. 27 No. 2, pp. 185-203.
Zahra, S.A., Hayton, J.C., Salvato, C., 2004. Entrepreneurship in family vs. non-family
Zahra, S.A., Neubaum, D.O., Huse, M., 2000. Entrepreneurship in medium-size companies: exploring the effects of ownership and governance systems. J. Manag. 26 (5), 947– 976.
Zona, F., Minichilli, A., Zattoni, A., 2008. Boards of directors and firm innovation: an empirical analysis on large Italian companies. In: Huse, M. (Ed.), The Value Creating Board: Corporate Governance and Organizational Behavior, Matter and Selection. Canada, pp. 495–504.
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Aghion, P., Reenen, J.Van., Zingales, L., 2013. Innovation and institutional ownership. Amer. Econ. Rev. 103, 277–304.
Ashwin, A.S., Krishnan, R.T., George, R., 2016. Board characteristics, financial slack and R&D investments: an empirical analysis of the Indian pharmaceutical industry. Int. Stud. Manag. Organ. 46 (1), 8–23
Barker, V.L., Mueller, G.C., 2002. CEO characteristics and firm R & D spending. Manage. Sci. 48 (6), 782–801
Barsky, R.B., Juster, F.T., Kimball, M.S., Shapiro, M.D., 1997. Preference parameters and behavioral heterogeneity: an experimental approach in the health and retirement study. Q. J. Econ. 112 (2), 537–579.
Cheng, S., 2008. Board size and the variability of corporate performance. J. Financ. Econ. 87 (1), 157–176.
Chintrakarn, P., Jiraporn, P., Tong, S., Chatjuthamard, P., 2015. Estimating the effect of entrenched boards on firm value using geographic identification. Finance Res. Lett. 12, 109–116. http://dx.doi.org/10.1016/j.frl.2014.11.002.
Cohen, W. and Levinthal, D. (1990), “Absorptive capacity: a new perspective on learning and innovation”, Administrative Science Quarterly, Vol. 35 No. 1, pp. 128-152.
Cumming, D., Leung, T., 2018. Diversity and innovation: the differential role of scope versus levels (SSRN scholarly paper ID 3181323). Soc. Sci. Res. Netw.
Cumming, D., Leung, T., 2021. Board diversity and corporate innovation: regional demographics and industry context. Corp. Gov. An Int. Rev. 29, 277–296.
Cuong, L.K., Hau, H.T., 2021. Does innovation promote access to informal loans? Evidence from a transitional economy. Finance Res. Lett. 40. http://dx.doi. org/10.1016/j.frl.2020.101718.
Daily, C.M., Dalton, D.R., 1997. CEO and board chair roles held jointly or separately: much ado about nothing? Acad. Manag. Perspect. 11 (3), 11–20.
Duran, M., 2014. Board directors’ preferences – what are good aggregation rules? Finance Res. Lett. 11 (2), 84–90. http://dx.doi.org/10.1016/j.frl.2014. 02.002
Eisenberg, T., Sundgren, S., Wells, M.T., 1998. Larger board size and decreasing firm value in small firms. J. Financ. Econ. 48 (1), 35–54
Eulerich, M., Velte, P. and van Uum, C. (2013), “The impact of management board diversity on corporate performance”, Problems and Perspectives in Management, Vol. 11 No. 4, pp. 23-37.
Faleye, O., Hoitash, R., Hoitash, U., 2011. The costs of intense board monitoring. J. Financ. Econ. 101, 160–181 firms: a resource-based analysis of the effect of organizational culture. Enterpren. Theor. Pract. 28 (4), 363–379.
Galia, F., Zenou, E., 2012. Board composition and forms of innovation: does diversity make a difference? Eur. J. Int. Manag. 6, 630–650
Golden, B.R., Zajac, E.J., 2001. When will boards influence strategy? Inclination power¼ strategic change. Strat. Manag. J. 22 (12), 1087–1111
Gonzales-Bustos, J.P., Hernandez-Lara, A.B., Li, X., 2017. Board composition in family and non-family innovative businesses. Corp. Ownersh. Control 15 (1), 459–466.
Goodstein, J., Boeker, W., 1991. Turbulence at the top: a new perspective on governance
Goodstein, J., Gautam, K., Boeker, W., 1994. The effects of board size and diversity on strategic change. Strat. Manag. J. 15 (3), 241–250.
Gul, F.A., Srinidhi, B., Ng, A.C., 2011. Does board gender diversity improve the informativeness of stock prices? J. Account. Econ. 51, 314–338.
Hambrick, D.C., Mason, P.A., 1984. Upper echelons: The organization as a reflection of its top managers. Acad. Manag. Rev. 9 (2), 193–206.
Hernandez-Lara, A.B., Gonzales-Bustos, J.P., 2020. The influence of family business and women directors on innovation. Appl. Econ. 52 (1), 36–51.
Kogut, B. and Zander, U. (2007), “Knowledge of the firm, combinative capabilities, and the replication of technology”, Organization Science, Vol. 3 No. 3, pp. 383-397
Kwon, U., Shin, J.K., 2007. The exploratory study of predictors affecting on systematic succession planning of family firms in Korea. J. Hum. Resour. Manag. Res. 14 (4), 217–233.
Li, X., Zhou, J., 2012. Research on the relationship between board diversity and firm technological innovation. In: Proceedings of the International Conference on Management Science Engineering 19th Annual Conference, pp. 1612–1617.
Li, Z., Rainville, M., 2021. Do military independent directors improve firm performance? Finance Res. Lett. 101988. http://dx.doi.org/10.1016/j.frl.2021. 101988.
Ling, L., Zhou, X., Liang, Q., Song, P., Zeng, H., 2016. Political connections, overinvestments and firm performance: Evidence from Chinese listed real estate firms. Finance Res. Lett. 18, 328–333. http://dx.doi.org/10.1016/j.frl. 2016.05.009.
Makkonen, T., Williams, A., Habersetzer, A., 2018. Foreign board members and firm innovativeness: an exploratory analysis for setting a research agenda. Corp. Gov. Int. J. Bus. Soc. 18, 1057–1073.
Martini, S.B., Corvino, A., Rigolini, A., 2012. Board diversity and investments in innovation: empirical evidence from Italian context. Corp. Ownersh. Control 10, 9–25.
Midavaine, J., Dolfsma, W., Aalbers, R., 2016. Board diversity and R&D investment. Manag. Decis. 54, 558–569
Østergaard, C.R., Timmermans, B., Kristinsson, K., 2011. Does a different view create something new? The effect of employee diversity on innovation. Res. Pol. 40 (3), 500-509.
Pearce, J.A., Zahra, S.A., 1992. Board composition from a strategic contingency perspective. J. Manag. Stud. 29 (4), 411–438.
Perez-Calero, S., Guerrero-Villegas, J., Hurtado, J.M., 2017. The influence of organizational factors on board roles. Manag. Decis. 55 (5), 842–871.
Pfeffer, J. and Salancik, G. (1978), The External Control of Organizations: A Resource-Dependence Perspective, Harper and Rows, New York, NY
Pfeffer, J., Salancik, G.R., 1978. The External Control of Organizations: A Resource Dependence Perspective. Harper & Row, New York.
Post, K., Byron, C., 2015. Women on boards and firm financial performance: a metaanalysis. Acad. Manag. J. 58 (5), 1546–1571.
Rice, M., Tierney, S., O’Hagan, S., Lyons, D. and Green, M. (2012), “Knowledge, influence, and firm-level change: a geographic analysis of boardassociated with Canada’s growing and declining business”, Geoforum, Vol. 43 No. 5, pp. 959-968.
Ruigrok, W., Peck, S., Tacheva, S., Greve, P. and Hu, Y. (2006), “The determinants and effects of board nomination committees”, Journal of Management and Governance, Vol. 10 No. 2, pp. 119-148.
Sila, V., Gonzalez, A., Hagendorff, J., 2016. Women on board: Does boardroom gender diversity affect firm risk? J. Corp. Finance 36, 26–53.
Solheim, M. and Fitjar, R. (2016), “Foreign workers are associated with innovation, but why?”, International Regional Science Review, OnlineFirst, doi: 10.1177/0160017615626217
Stein, J.C., 1988. Takeover threats and managerial Myopia, vol. 96, no. 1. pp. 61–80. http://dx.doi.org/10.1086/261524. structure changes and strategic change. Acad. Manag. J. 34 (2), 306–330.
Tellis, G.J., Prabhu, J.C., Chandy, R.K., 2009. Radical innovation across nations: The preeminence of corporate culture. J. Market. 73 (1), 3–23.
Terjesen, S., Sealy, R., Singh, V., 2009. Women directors on corporate boards: a review and research agenda. Corp. Govern. Int. Rev. 17 (3), 320–337
Wong, P.K., Ho, Y.P., Autio, E., 2005. Entrepreneurship, innovation and economic growth: Evidence from GEM data. Small Bus. Econ. 24, 335–350. http: //dx.doi.org/10.1007/s11187-005-2000-1, 2005
Zahra, S. and Gerard, G. (2002), “Absorptive capacity: a review, reconceptualization, and extension”, Academy of Management Review, Vol. 27 No. 2, pp. 185-203.
Zahra, S.A., Hayton, J.C., Salvato, C., 2004. Entrepreneurship in family vs. non-family
Zahra, S.A., Neubaum, D.O., Huse, M., 2000. Entrepreneurship in medium-size companies: exploring the effects of ownership and governance systems. J. Manag. 26 (5), 947– 976.
Zona, F., Minichilli, A., Zattoni, A., 2008. Boards of directors and firm innovation: an empirical analysis on large Italian companies. In: Huse, M. (Ed.), The Value Creating Board: Corporate Governance and Organizational Behavior, Matter and Selection. Canada, pp. 495–504.
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Published
2023-12-14
How to Cite
Prithaningtyas, A., & Windijarto, W. (2023). HOW CAN BOARD DIVERSITY PROMOTE CORPORATE INNOVATION? : A SYSTEMATIC LITERATURE REVIEW. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 7(3), 1860-1876. https://doi.org/10.31955/mea.v7i3.3602
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