Eliminating Shiny Objects:Technology Committee Presence, Composition, and Innovation

Abstract

The majority of the board`s work is done in committees. In addition to the three required committees (Audit, Compensation, and Governance/Nominating), boards often adopt optional committees to support the firm’s strategic focus. Yet, the impact of these optional committees and the importance of their composition has largely remained unexplored. In this paper, we explore the technology committee because of its rise in popularity and the growing need for firms to be innovative. Drawing upon the attention based view and upper echelons theory we explain how the formal structure of a technology committee focuses the attention of its members and improves firms’ innovation outcomes. Further, we examine the composition of the technology committee—the inclusion of board members with the ability to focus on technology-related issues (e.g., technology experts) and those with the need to focus (e.g., busy directors)—on the committee’s influence on the firm’s innovation. Our results indicate that firms that adopt technology committees experience higher subsequent innovation. Moreover, the structure of a technology committee provides a necessary focusing mechanism for busy directors who might otherwise be distracted; busy directors on a technology committee are positively associated with subsequent innovation. Surprisingly, however, technology experts’ membership on a technology committee is not always advantageous and is contingent on commitment of firm resources to the innovation processes. Overall, our findings highlight the importance of optional board committees and offer a practical guide to structuring boards in ways that result in greater innovation output.