Abstract
Since corporate scandals in the last decade, corporate governance system has been highly focused, besides, now under knowledge-based economy the innovation ability of enterprises is a key factor to enterprise’s success. However, how the board of directors effects firms’ innovation ability has been rarely explored. Generally, it is thought that corporate governance could provide functions to bring stakeholders the greatest profit and have better operating efficiency. Precious study proved that corporate governance is related to corporate performance. This study discusses the relationship between board of directors and the firm’s innovation ability, including size of board directors, proportion of shareholding and traits of board of directors. By using patent counts as an index to measure a firm’s innovation ability, this study examined 255 public listed electronic firms in Taiwan by using unbalanced 5 year panel data. This study adopts one way fixed effect model to evaluate parameters of model, and use F-test to examine the explanatory power of a model. Finally, this study shows how the corporate governance system affects firms’ innovation ability, and provides suggestion that how corporate governance system, board directors and other traits are effective in firms innovation ability.
Highlights
The term of “Corporate Governance” has variously meanings with different scholars, but on the basis concepts of supervision and prevention, it could be say as “corporate supervising” or “corporate controlling”, and for the potential enhancing function it would be viewed as “corporate managing” or “corporate governance”
This study investigates the relationship between corporate governance between innovation ability, and the empirical model in this study is showed as follow (1): Innovationi,t 0 1Numberit 2DirOwershipi,t 3PerGenderi,t 4PerOutsider 5Educationi,t (1)
While employ patent count granted from Taiwan to evaluate innovation ability, the results show that there are some positive relationship between size of board directors and innovation ability (Table 3)
Summary
The term of “Corporate Governance” has variously meanings with different scholars, but on the basis concepts of supervision and prevention, it could be say as “corporate supervising” or “corporate controlling”, and for the potential enhancing function it would be viewed as “corporate managing” or “corporate governance”. Though the meanings are not really the same, the main concept of these is the same that through legislation for controlling and supervising corporate to prevent operation deficiency and to realize it’s social responsibility. Since finance scandals emerge in an endless stream, corporate governance simultaneously has become a core issue to prevent miscellaneous falsities and improve the effectiveness of management in recent years. The discussion of corporate governance included agency problem of separation of ownership and management right (Jensen & Meckling, 1976) and of major stockholder and minor stockholder (La Porta, Lopez-de-Silanes, & Shleifer, 1999). Taiwan Government work hard on enhancing the efficiency of corporate governance and realize the concept and system of corporate governance
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