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

Based on data collected about the composition of the board of directors, the authors determine statistically if the characteristics of directors predicts the extent to which firms invest more in R & D.

Findings

The authors find, unexpectedly, that tenure diversity lead firms to invest less in R & D, while education diversity and gender diversity makes firms invest more. Gender diversity positively moderates education diversity as well, strengthening the effect found.

Research limitations/implications

The sample of firms the authors include in the paper is restricted due to the overwhelming difficulty in collecting data about the composition of boards of directors, and their backgrounds.

Practical implications

The paper offers insights into how boards of directors might need to be composed in order to try have firms invest more in R & D.

Social implications

Innovative firms are more competitive and more sustainable. Knowing what contributes to a firm’s investment in R & D is thus of great social value.

Originality/value

The authors include a much larger set of diversity measures than any previously published study, and provide counter-intuitive findings that have implications for practice, society, as well as theory about team composition.

Citation

Midavaine, J., Dolfsma, W. and Aalbers, R. (2016), "Board diversity and R & D investment", Management Decision, Vol. 54 No. 3, pp. 558-569. https://doi.org/10.1108/MD-09-2014-0574