Board gender diversity, innovation ambidexterity, and firm performance board gender diversity, innovation ambidexterity, and firm performance

We posit that board gender diversity enables innovation ambidexterity, defined as the simultaneous pursuit of innovation efficiency and radical innovation. Building on upper echelons theory, we argue that behavioral, cognitive, and social factors influence innovation ambidexterity in firms with gender-diverse boards. Using panel data, textual analysis, and instrumental variable regressions, we find that board gender diversity is positively associated with four measures of innovation ambidexterity. We identify prudent experimentation and organizational trickle-down effects as two mechanisms underlying the impact of board gender diversity on innovation ambidexterity. Moderated-mediation models show that the impact of board gender diversity on innovation ambidexterity via prudent experimentation and trickle-down effect is (a) lower in firms in which female directors have greater monitoring responsibilities, and (b) higher in firms in which directors’ compensation is tied to long-term goals. Innovations produced by gender-diverse boards contribute positively to firm fundamentals but are undervalued by financial markets. Our study provides a deeper understanding of how governance structures contribute to innovation ambidexterity and organizational performance.