Does Board Diversity Promote Disruptive Innovation?

This paper studies how corporate board diversity affects disruptive innovation. We find that director boards with diverse demographic and cognitive traits are positively related to not only the quantity of disruptive and novel patents invented by their firms but also to these patents’ technological and market impacts. We glean evidence on causality for this positive relationship using an instrumental variable approach. We shed light on the mechanisms that explain this relationship. Specifically, diverse boards tend to prioritize strategic alliances (e.g., joint R&D and technological licensing) and hiring executives with general skills, both of which reduce managerial concerns over the exploration risk