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Board diversity and corporate propensity to R&D spending

Yes / Drawing on collective contributions and group performance perspectives, this paper examines the role of board diversity in firms’ R&D investment decisions. Building on a fault-line argument about a team’s demographic
attributes, this study also decomposes the impact of demographic and cognitive diversity on R&D spending. The study sample contains UK data of non-financial companies covering the period between 2005 and 2018. We
employ panel data analysis techniques and control for potential endogeneity issues through the application of the
two-step system Generalised Method of Moments (GMM) estimations. The findings demonstrate a positive and
significant relationship between board diversity and level of corporate R&D spending. The findings also show
cognitive diversity as significantly positively associated with corporate R&D investments. Demographic diversity, however, has an insignificant relationship with corporate spending on R&D. The results further show that demographic diversity negatively moderates the relationship between cognitive diversity and spending on R&D. Our main findings document that the board’s attributes as a group significantly influence decisions of strategic importance such as, investment in R&D projects. The findings on sub-dimensions of board diversity imply that as compared to demographic diversity, functional/cognitive diversity is more relevant to strategic decisions and
related outcomes. The study has practical implications for shareholders in documenting the importance of board
diversity, and policy implications for regulators in highlighting the separate roles of behavioural and cognitive diversity in shaping firms’ strategic investment decisions.

Identiferoai:union.ndltd.org:BRADFORD/oai:bradscholars.brad.ac.uk:10454/19534
Date23 July 2023
CreatorsAsad, Muhammad, Akbar, Saeed, Li, Jing, Shah, S.Z.A.
PublisherElsvier
Source SetsBradford Scholars
LanguageEnglish
Detected LanguageEnglish
TypeArticle, Published version
Rights© 2023 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/), CC-BY

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