The Effect of Board Gender Diversity on R&D

Abstract

In this paper, we propose that gender affects the ambidextrous behavior of a firm. Subsequently, we study this empirically by using a micro‐foundational approach. Building on behavioral ambidexterity and the incentive approach to ambidexterity, we construct a theoretical argument that the male-female gender identity of directors influences the exploitative and explorative behavior of organizations. This theory is then tested empirically using a data base that includes individual data for CEOs and board members in 44 countries, from 1999 to 2014, for 18,881 company-year pairs. Our findings show that gender diverse boards of directors are generally more conservative regarding investments in risky explorative behaviour, measured as R&D investment. The findings further show that gender diverse boards do encourage equity-based remuneration systems, which in turn, boost long-term explorative behaviour. Our findings show that gender diverse boards result in more complex organizational outcomes than assumed originally. Our data show that even gender diverse boards which have a minority of women behave differently in terms of the decisions made and the resulting outcome for ambidextrous organizational behavior.