Board networks and corporate innovation
Journal
Management Science
Journal Volume
67
Journal Issue
6
Pages
3618-3654
Date Issued
2021
Author(s)
Wu, Q.
Abstract
This paper studies whether board connectedness affects corporate innovation. We find that well-connected boards have a positive effect on innovation activities and quality. The effect is stronger when firms have higher demand for advising or face more severe agency problems. Firms with greater needs for external finance benefit more from board connections with bankers. We show that the positive relation is causal and robust based on a battery of empirical tests including exogenous variation in board connectedness resulting from death and retirement of directors and from a regulatory shock under new exchange listing rules. Evidence indicates that types and relatedness of connections as well as director characteristics contribute to cross-sectional heterogeneity of the positive effect. Copyright: © 2020 INFORMS
Subjects
Advising; Board networks; Directors; External financing; Innovation; Monitoring
SDGs
Other Subjects
Operations research; Agency problems; Corporate innovation; Empirical test; Innovation activity; Management
Type
journal article