Does Board Diversity Influence Firms' Innovative Activity? Evidence from the firm-level micro data in Japan

         
Author Name INUI Tomohiko  (Faculty Fellow, RIETI) /NAKAMURO Makiko  (Keio University) /EDAMURA Kazuma  (NISTEP) /OZAWA Junko  (Cabinet Office)
Creation Date/NO. December 2014 14-J-055
Research Project Impact of Diversity and Work-life Balance
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Abstract

This paper empirically examines the impact of board diversity on firms' innovative activity, taking advantage of the unique firm-level dataset in the period 2000-2011 in Japan. We constructed measurements of the degree of board diversity by using various characteristics of board members such as gender, age, tenure, and education, and found no significant impacts on firm innovative activity after controlling for the firms' fixed effects. However, when we restricted the sample to a group of firms with a high foreign ownership ratio or globalized firms, we found the presence of female board members is positively associated with promoting firms' innovative activity as measured by research and development (R&D) intensity. Our finding suggests that board diversity is not associated with the innovation across firms in general, but if a firm has already accumulated the management skills to handle the diversified voices and opinions from board members, this helps it to become more innovative.