Board structure and intellectual capital efficiency: does the family firm status matter?

Abstract

Building on the argument that corporate boards are responsible for the creation and leveraging of a firm’s intellectual capital (IC), this study empirically examines the relation between boardroom characteristics—namely board size, director independence, leadership structure and gender diversity—and IC efficiency. Additionally, we propose that the family firm (FF) status is a specific condition that moderates the effect of board features on IC efficiency. We test the above propositions using data on 113 nonfinancial firms continuously listed on the Italian stock exchange over the period 2011–2016. The empirical results indicate that (1) IC efficiency is significantly lower in FFs, which challenges previous research claiming that FFs have some performance advantages over non-FFs and (2) that board size and director independence have an opposite effect in FFs and non-FFs (positive and negative, respectively), suggesting that the role of individual board mechanisms as drivers of (or brakes on) IC efficiency is contingent on firm characteristics. This paper extends the empirical literature supporting the link between board composition and IC efficiency, which has been scant and inconclusive. Furthermore, the literature has seldom considered the firm contingencies potentially affecting this relation. Regarding practical implications, our findings indicate that there is no one best way of structuring corporate boards that can fit all firm conditions; specifically, the results call into question conventional ‘best practices’ of board composition that emphasise director independence, suggesting that this governance mechanism may not have a consistent effect on organisational outcomes such as IC efficiency.