Board diversity and R & D investment

Abstract

Purpose -The purpose of this paper is to investigate the effect of board diversity on the extent to which firms invest in R&D.Design/methodology/approach -empirical analysis of 175 firm-year observations for Fortune 500 firms in high tech industries and the four different indications of diversity of their boards.Findings -Boards that can tap into a diversity of sources for information can be expected to make better decisions. Diversity in a team and a board can, however, also impede team performance.Measuring the diversity of boards in four different ways, two of which are person-related (age and gender) and two information-based (education and tenure), we analyze which kind of diversity ensures that the firm governed by a board will invest more R&D. We find, unexpectedly, that tenure diversity leads to firms being less innovative, while education diversity and gender diversity make firms more innovative. Gender diversity positively moderates education diversity as well, strengthening the effect found. We discuss the implications of our findings for management and society.Originality/value -This study conceptually differentiates between 2 information-based and 2 personrelated indications of board (team) diversity, theoretically elaborate on the effects they have, and provide empirical evidence for their effects.

Does R&D Expenditure with Heavy Related Party Transactions Harm Firm Value?

“…Similarly, Almazan et al [29] and others reported that CEO compensation influenced the level of R&D expenditure of firms [30][31][32]. In a recent study, Midavaine et al [32] reported that board diversity, such as their tenure, education, and gender, also relate to firms' decisions on R&D investment.…”

“…Jensen and Meckling [27] has stated that managers tended to avoid high-risk investment, as its ownership was lower, in order to avoid private costs and enhance their personal utilities, while managerial ownership or managerial incentive can act as a determinant when defining R&D expenditure [28]. Similarly, Almazan et al [29] and others reported that CEO compensation influenced the level of R&D expenditure of firms [30][31][32]. In a recent study, Midavaine et al [32] reported that board diversity, such as their tenure, education, and gender, also relate to firms' decisions on R&D investment.…”

Exploring the Influence of Executive Management Diversity on IT Governance

“…In the same vein, Midavaine et al (2016) examine the influence of two types of management team diversity on R&D investment: information-based diversity (education and tenure) and personalbased diversity (age, gender). Information-based diversity refers to cognitive abilities; that is, to attributes reflecting managers' ability to select and process relevant information (Midavaine et al, 2016).…”

“…Information-based diversity refers to cognitive abilities; that is, to attributes reflecting managers' ability to select and process relevant information (Midavaine et al, 2016).…”

“…Drawing on Pelled (1996) and Midavaine et al (2016), we take the approach that different types of diversity can produce different outcomes. We focus on job-related/information-based demographic diversity variables since some dimensions of diversity such as age and gender are less relevant to strategic decision-making than experience and tenure (Simons et al, 1999).…”