Board demographic, structural diversity, and eco-innovation: International evidence

Abstract

Research question/issue

We examine whether and how board diversity, measured by demographics (i.e., board gender, cultural diversity, tenure, social capital, expertise, and age) and structural diversity (i.e., board independence, size, board seat accumulation-chair, board compensation, and board meeting frequency), influence corporate eco-innovation.

Research findings/insights

Utilizing a global sample of publicly listed companies for the period 2004–2019, we find that a one-standard deviation increase in demographic and structural diversity translates into 4.66% and 7.11% higher corporate eco-innovation, respectively. Furthermore, we discover that demographic and structural diversity promotes eco-innovation by offsetting the negative effects of political risk. In an additional analysis, we find evidence that, in the absence of greater external monitoring (institutional investors and analyst following), organizations benefit more from the monitoring role of board diversity.

Theoretical/academic implications

By adopting the concept of “bundling the governance mechanisms,” our study adds to the ongoing discourse about the function of board diversity in addressing corporate climate footprints by offering original evidence that board diversity heterogeneity—demographic and structural diversity—matters for corporate eco-innovation.

Practitioner/policy implications

Given the increasing pressure on companies to manage their environmental impacts and carbon footprints, our paper has significant ramifications for those involved in promoting eco-innovative business practices, such as policymakers, regulators, and practitioners.