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Board capital and exploration: from a resource provisional perspective

Nami Kim (Department of Management, Korea University Business School, Seoul, Republic of Korea)
Eonsoo Kim (Department of Management, Korea University Business School, Seoul, Republic of Korea)

Management Decision

ISSN: 0025-1747

Publication date: 19 October 2015

Abstract

Purpose

Drawing upon the resource dependence theory, the purpose of this paper is to examine how the board capital diversity influences the explorative innovation of firms, attempting to resolve the inconsistent empirical findings of the effect of outside directors on firm’s R & D strategy.

Design/methodology/approach

Using a sample of Korean manufacturing firms which consider R & D capability to be one of their core competencies, the study uses negative binomial model to test the influence of board capital diversity on explorative innovation.

Findings

Results support the value of moderate level of board diversity hypothesis by demonstrating that board capital diversity shows an inverted U-shaped relationship with explorative innovation. The results also suggest that CEO ownership positively moderates the relationship between board capital diversity and firms’ innovative performance.

Originality/value

Mainstream research has focussed on the directors’ monitoring role based on agency theory, overlooking the more positive resource provision role. Taking on the concepts of board capital and exploration, the study introduces the notion that outside directors should be selected with a view as vehicles for bringing in valuable expertise and social linkages for the firm’s explorative innovation.

Keywords

  • Corporate governance
  • Resource dependence theory
  • Board capital diversity
  • Board ownership
  • CEO ownership
  • Explorative innovation

Acknowledgements

This research has been supported by KUBS Faculty Research Grant.

Citation

Kim, N. and Kim, E. (2015), "Board capital and exploration: from a resource provisional perspective", Management Decision, Vol. 53 No. 9, pp. 2156-2174. https://doi.org/10.1108/MD-11-2014-0648

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Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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