THE HUMAN CAPITAL OF BOARDS OF DIRECTORS AND INNOVATION: AN EMPIRICAL EXAMINATION OF THE PHARMACEUTICAL INDUSTRY

Abstract

The human capital of corporate boards of directors is a key organizational resource affecting a variety of strategic outcomes. Using human capital theory within the broader theoretical contexts of agency theory and the resource dependence perspective, we investigate the effects of certain types of board human capital on firm innovation. Our findings are generally supportive of our theory that board human capital is associated with firm innovation. Specifically, we examine the role of certain types of board human capital on firm innovation and find that scientific expertise, industry experience, financial expertise, and women directors positively affect firm innovation in the pharmaceutical industry, with innovation measured by R&D expenditures and number of patents. These results imply that the knowledge, experience, and expertise that directors bring to corporate boards are important considerations in constituting corporate boards. Further, our work adds to understanding of the impact of board characteristics on firm strategic outcomes.