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Outside directors on the board and innovative firm performance

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  • Balsmeier, Benjamin
  • Buchwald, Achim
  • Stiebale, Joel

Abstract

We investigate how outside directors on supervisory boards influence innovative activities of the firms they advise and monitor. Based on panel data on the largest German companies, the econometric analysis shows a positive influence of external executives on innovative firm performance, measured by patent applications. Differentiating between outside directors from innovative and non-innovative companies reveals that only outside directors from innovative firms increase patenting activities at the firms they advise and monitor. This effect increases with the technological proximity between the appointing firm and the outsider's home firm. Outside directors from non-innovative firms are negatively associated with the appointing firm's innovativeness. The results indicate that external executives with an appropriate professional background can provide valuable specific knowledge and expertise to the board.

Suggested Citation

  • Balsmeier, Benjamin & Buchwald, Achim & Stiebale, Joel, 2014. "Outside directors on the board and innovative firm performance," Research Policy, Elsevier, vol. 43(10), pages 1800-1815.
  • Handle: RePEc:eee:respol:v:43:y:2014:i:10:p:1800-1815
    DOI: 10.1016/j.respol.2014.06.003
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    Cited by:

    1. repec:etr:series:v:9:y:2018:i:1:p:022-029 is not listed on IDEAS
    2. Ghosh, Saibal, 2016. "Banker on board and innovative activity," Journal of Business Research, Elsevier, vol. 69(10), pages 4205-4214.
    3. Bischoff, Oliver & Buchwald, Achim, 2016. "Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition," Annual Conference 2016 (Augsburg): Demographic Change 145730, Verein für Socialpolitik / German Economic Association.
    4. Buchwald, Achim, 2015. "Competition, outside directors and executive turnover: Implications for corporate governance in the EU," DICE Discussion Papers 174, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. repec:eee:joacli:v:37:y:2016:i:c:p:55-75 is not listed on IDEAS
    6. Bischoff, Oliver & Buchwald, Achim, 2015. "Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition," MPRA Paper 63413, University Library of Munich, Germany.
    7. repec:eee:jbfina:v:80:y:2017:i:c:p:51-70 is not listed on IDEAS
    8. repec:kap:jincot:v:18:y:2018:i:1:d:10.1007_s10842-017-0250-7 is not listed on IDEAS
    9. Buchwald, Achim & Thorwarth, Susanne, 2015. "Outside directors on the board, competition and innovation," DICE Discussion Papers 173, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    Corporate governance; Innovation; Patents; Board composition; Outside directors;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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