Interfaces, social information processing, and diversity cascades: How board diversity influences invention output

Abstract

Although recent studies report a positive relationship between board diversity and firms' invention output, less is known about the mechanisms by which they operate, given that boards are typically far removed from on-the-ground invention activities. Drawing from research on interfaces and social information processing, we propose a theory of diversity cascades across the organizational hierarchy. Specifically, we posit that board diversity has a positive––albeit indirect––influence on firms' invention output. This relationship is mediated by the diversity of top management teams and inventor diversity, as board diversity cascades from the top to lower ranks of an organization. This indirect effect is strengthened by the presence of inside executive directors who span the board-TMT interface, especially in terms of demographic diversity. We find support for our hypotheses by investigating a longitudinal sample of S&P 1500 firms and their patenting activities over the period 2000–2018.