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Busy Boards, Entrenched Directors and Corporate Innovation

Author

Listed:
  • Brian Bolton

    (B.I. Moody III College of Business Administration, University of Louisiana at Lafayette, Lafayette, LA 70504, USA)

  • Jing Zhao

    (School of Business, Portland State University, Portland, OR 97201, USA)

Abstract

We provide a comprehensive study of how different corporate governance mechanisms influence corporate innovation. Using panel data regression analysis across a sample of more than 13,600 firm-years for firms based in the United States between 1996–2010, we find that entrenched boards, though commonly associated with lower firm value, actually generate substantial innovation. We find that busy boards hinder innovation unless they also have interlocking relationships. Conversely, interlocked directors enhance innovation, unless they are busy. Directors who are CEOs or Board Chairs at other companies hinder innovation. Interestingly, despite being significant determinants of firm value in other studies, director experience, independence and ownership are not related to innovation. In order to be innovative, firms should appoint directors to leverage their professional relationships and directors must have a long-term perspective.

Suggested Citation

  • Brian Bolton & Jing Zhao, 2022. "Busy Boards, Entrenched Directors and Corporate Innovation," IJFS, MDPI, vol. 10(4), pages 1-34, September.
    • Handle: RePEc:gam:jijfss:v:10:y:2022:i:4:p:83-:d:920569
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    References listed on IDEAS

    as
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    2. Gilles Hilary & Vanessa Serret, 2023. "Governance and Digital Transformation [Gouvernance et transformation numérique]," Post-Print hal-04380300, HAL.

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