An Untapped Catalyst for R&D and Innovation: Women in the Boardroom

HONG KONG--(BUSINESS WIRE)--Gender balance in the workplace has been a rallying cry around the world since the early 1900s, when women began campaigning for change in marches and protests that eventually led to the establishment of International Women’s Day on March 8th. In the recent decade, achieving gender balance has been recognized as a contributor to a more positive company culture as well as increased growth and profitability. A new study, co-authored by Dr. Gaoguang Zhou from School of Business of Hong Kong Baptist University, suggests a higher number of female directors in the boardroom is associated with enhanced R&D and innovation performance, providing strong evidence to the call.

The growing awareness of the benefits of including female directors on company boards has led to an increase in their numbers in companies in the US and other countries, but a “glass ceiling” may well still exist within the corporate sector. The study, titled “Do Female Directors Enhance R&D Performance?”, cited that the percentage of board seats held by women in innovation-intensive industries in the US is only 7.1%.

Nevertheless, the study looked at a large sample of US listed companies and found that:

• Firms with more female directors demonstrate higher R&D performance: While women have been perceived to play a less important role when it comes to innovation, firms with more female directors experience higher R&D output (captured by patents and citations generated from R&D) and higher R&D productivity (measured by the relationship between R&D and future sales).
• The more the female directors, the higher the ROI of a firm’s R&D: An increase of the percentage of female directors by one standard deviation leads to an increase of Patent-RD sensitivity and Earnings-RD sensitivity by 16% and 24% respectively.
• Monitoring and attendance from female directors are key: Female directors often play a monitoring role rather than an advisory role in the R&D process, through audit, compensation, corporate governance or nominating committee. Meanwhile, female directors often attend more board meetings, which is a crucial avenue for directors to function more effectively, also leading to higher R&D performance, output and productivity.

More work needed to boost female participation in US companies
According to BoardEx’s Global Gender Balance Report 2021, while the US has made significant progress in gender balance at the board level, the country stands at the 16th place with an average percentage of 29% women on boards, lagging behind France (44%), Norway (40%) and Sweden (37%) at the top of the list, while the UK is ranked 6th with 36% female participation.

Commenting on the results of the study, Dr. Zhou said: “Many people have questioned whether the 'glass ceiling' remains especially severe in the innovation industry. This study, however, provides empirical evidence of a positive relationship between female directors and R&D performance, something we are motivated to shed light on this International Women's Day to #BreaktheBias.”

Find out more at https://bus.hkbu.edu.hk.