Assembling the Puzzle Pieces Together: Board Gender Diversity, Managerial Ability and Eco‐Innovation

ABSTRACT

This study examines whether board gender diversity promotes corporate eco‐innovation and whether managerial ability acts as a mediating mechanism in this relationship. Using a sample of 5756 multinational enterprises identified from LSEG, comprising 48,015 firm‐year observations over the period 2014–2024, the results show that greater female representation on the board is positively associated with managerial ability and eco‐innovation. The findings also reveal a partial mediation effect, indicating that gender‐diverse boards foster eco‐innovation both directly and indirectly by strengthening the managerial capabilities required to translate strategic environmental priorities into concrete organisational actions. Theoretically, the study contributes to agency theory, upper echelons theory, social role theory, the resource‐based view and dynamic capabilities theory by showing that board gender diversity shapes firms' environmental decisions while managerial ability operates as an internal capability that facilitates their implementation. These results suggest that firms and policymakers should promote not only greater female board representation but also the managerial capabilities needed to transform board‐level sustainability orientations into effective eco‐innovation practices.