In an increasingly competitive business environment, innovation is essential for companies to address global challenges and achieve sustainable growth. The board of directors, as responsible for corporate governance and strategic direction, plays a critical role in driving corporate innovation. Their ability to incorporate innovation into organizational strategies, allocate the necessary resources and manage the inherent risks involved can be significantly influenced by the predominant presence of directors who serve simultaneously on three or more boards. The research aims to investigate the influence of busy boards on corporate innovation.
To examine the role of busy boards in risky decision-making such as research and development (R&D) intensity, this research uses a multivariate fixed-effects regression model on a database from 2012 to 2023 of the European companies with the highest R&D investments according to the “EU Industrial R&D Investment Scoreboard.” The final sample includes 141 listed companies with a total of 1,692 observations.
The results support the “reputation hypothesis” by demonstrating that the accumulated knowledge and external networks of busy boards contribute to more effective decision-making in innovation. The findings highlight the crucial advisory role of boards in addressing complex and high-risk corporate decisions. In sum, the research reveals the importance of board connectivity for long-term growth and innovation strategies.
Little research has focused on analyzing the role of busy boards in managing high-risk corporate decisions. As a result, this research makes a significant contribution by providing valuable insights on the importance of board composition in driving corporate innovation and managing strategic risk.
