Boards As Resource Providers and Monitors For Research and Development

Abstract

Innovation is essential for every organization. Yet the relationship betweenboards and innovation remains unclear. We argue that boards not only monitor,but also provide resources, and innovations require both proper levels of resources(skills) from the board, and appropriate forms of control. In this study, we integrateresource-dependence and agency perspectives to examine how a board’s knowledgeand skills (board diversity) and a board’s preference for behavior based controls(board composition) influence the board’s ability to provide resources and designcontrols, which in turn affect the level of research and development intensity inthe firm. Hypotheses are tested using a panel data set of firms in research intensiveindustries.