How board structure shapes corporate innovation? Empirical evidence from emerging economy
Aftab Ahmad, Shuaib Ali, Junid AhmadPurpose
Corporate innovation is a decisive driver of long-term business success. However, firms in emerging markets often struggle with weak governance structures and inefficient decision-making, which can impede their innovation potential. Governance mechanisms, particularly the role of the board of directors, play an important role in shaping corporate innovation strategies.
Design/methodology/approach
This study explores the dynamic relationship between the board of directors' characteristics and innovations. Corporate innovation is measured by R&D intensity and patent counts. This study uses hand-collected data from 2010 to 2018 of textile sector's listed firms on the Pakistan Stock Exchange (PSX).
Findings
The result reveals that frequent board meetings positively influence R&D intensity and patent counts. An inverted U-shaped relationship between board size and innovation suggests that optimal board composition is important for innovation. Furthermore, CEO duality significantly enhances innovation in the textile section, while the presence of foreign directors promotes creativity.
Practical implications
The finding offers valuable suggestions for policymakers and corporate leadership in emerging markets. Firms should optimize board structure, encourage foreign directors' participation and leverage CEO leadership dynamics to drive innovation.
Originality/value
This study provides novel evidence on how board characteristics influence corporate innovation in Pakistan's textile sector. Using hand-collected data from 2010–2018, it measures innovation through both R&D intensity and patent counts. The study further identifies an inverted U-shaped relationship between board size and innovation and highlights the roles of board meetings, CEO duality and foreign directors in promoting innovation in an emerging-market context.