Board Diversity, Inventor Collaboration, and Corporate Innovation

Abstract

Many firms often tout their commitment to diversity, sometimes appointing racial minorities to their board of directors. We provide empirical evidence on the positive effect of board diversity on corporate innovation. We hypothesize that an important channel through which firms with diverse boards achieve greater innovation success is to create an inclusive environment that attracts key human capital and fosters collaboration. We find that firms with more ethnically diverse boards employ more active and collaborative inventors, attract more minority inventors, and promote greater collaboration among inventors with different ethnic backgrounds. These outcomes in turn lead to corporate innovation success.