Board Diversity and Innovation Performance in Malaysia

Abstract

A board of directors consists of a set of key personnel that hold vital positions in a company. Based on the premise of the resource dependence theory, we explore the association between board diversity and innovation performance in Malaysia. The sample consists of 220 companies from the industrial product sector of the main market of Bursa Malaysia for the financial year 2013. Board diversity is represented by a comprehensive score that includes age, gender, ethnicity, nationality, education, tenure, area of experience and directorship in other companies. Results of the regression analysis show that there is a positive association between board diversity and innovation performance. Our findings contribute to the policy involving the diversity of corporate boards by suggesting that policy, such as one of gender diversity in Malaysia, is expanded to include multi-dimensional aspects of board diversity that better represent the economic, legal and cultural environment of a country.