Board Chair Career Variety, Selection of Independent Directors, and Firm Innovation Outcomes

Abstract

Given that board chairs are regarded as a firm’s most powerful leader in many countries, this study investigates the impact of their career variety on firm innovation outcomes. Building on recent upper echelons theory argument that career variety reflects both one’s dispositional preference for novelty and accumulated cognitive breadth, we propose that board chairs with higher career variety are likely to have not only a stronger motivation to pursue innovation but also a greater capability to facilitate innovation thorough the appointments of independent directors who can help their firms improve innovation outcomes. Consequently, we predict that board chair career variety is positively associated with firm innovation outcomes both directly and indirectly via the appointments of independent directors. Using data from a large sample of publicly listed non-state-controlled firms in China during 2006 to 2016, we find that the number and the overseas experiences of independent directors partially mediate the positive effect of board chair career variety on firm innovation outcomes, as measured by the numbers of patent applications filed and granted. These results support our theoretical predictions and contribute to the literature on how upper echelons impact firm innovation outcomes.