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Abstract
Board directors can serve as monitors or advisors. Prior research suggests that monitoring of the firm’s R&D process is ineffective, because outsiders are unable to gauge progress in R&D accurately, and increased pressure on management for short-run results increases managerial myopia that reduces innovation. In this paper, I find that board directors with Ph.D.’s in chemistry or biochemistry serving on the board of directors of chemicals firms are ineffective monitors, but provide particular forms of human and relational capital to the firm. The number of Ph.D. scientist board members is positively related to the probability that the firm creates highly cited patents, which meets the needs of both R&D scientists and firm investors. Firms with higher numbers of scientist directors receive more knowledge spillovers from competing firms, suggesting they are superior scanners of their competitive environments. In addition, the beneficial effect of Ph.D. scientist directors is stronger among firms with weaker...
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