The relationship between board characteristics and social responsibility with firm innovation

Abstract

PurposeThe present study aims to assess the potential impacts of board members' characteristics, including connectedness and independence, on the level of the firm's involvement in innovation and corporate social responsibility (CSR).Design/methodology/approachVariables of board members' interlock and independence are selected for measuring the board characteristics and their association with innovation. The range of disclosure of social responsibility (SR) of the firms inside and outside the industries is also analyzed through descriptive-correlational. The selected sample includes 280 firm-years listed firms on Iraq Stock Exchange during 2012–2017 and 1,026 firm-years on the Tehran Stock Exchange. The hypotheses are examined using multivariate regression models and panel data.FindingsThe observations show that board interlock and independence in both countries are willing to improve firms' innovation. Moreover, having controlled the industry index, the authors find that business environment innovation is willing to be transmitted into the firms through outside industry sources in Iran. In the Iraq country, regardless of industry index, the positive association between interlocked boards and firm innovation is established. Further analyses also articulate that board interlock is not considered a mechanism to transmit information and experiences about CSR activities.Originality/valueThis paper is a pioneer study to assess the relationship between board member characteristics and the firms' innovation and SR both in Iran and Iraq. Also, it extends the literature by considering the industry index as a significant source of knowledge and experience to gain more precise results. Therefore, the current paper may contribute to the development of knowledge in this field of study.