Board age diversity and digital transformation: Evidence from China

Heshu Huang, Yuchen Lu and Liukai Wang

International Review of Economics & Finance, 2025, vol. 100, issue C

Abstract: The intense competition in the digital age has compelled firms to accelerate their digital transformation (DT) strategies. Given that the board of directors serves as a core strategic decision-making body, understanding how its composition influences DT is crucial. This paper investigates the impact of board age diversity on DT, analyzing two dimensions of diversity: age variety (i.e., the breadth of age distribution) and age separation (i.e., the degree of age polarization). Drawing on a panel of 23,672 firm-year observations from Chinese firms, this study combines theoretical analysis with empirical tests to derive the following conclusions. First, board age variety enhances DT due to the benefits of resource heterogeneity. This effect is particularly pronounced in firms facing higher environmental complexity, including operational complexity, industry innovation, and systematic risk. Second, although age separation may increase the risk of intergenerational conflicts, the inclusiveness fostered by Confucianism mitigates this negative effect and promotes cooperation. Consequently, in the Chinese context, board age separation positively influences DT. This effect is stronger in firms with a more prominent influence of Confucian values. In these firms, age separation also significantly increases the board's risk-taking willingness and tolerance for failure, reflecting its acceptance of younger directors' risk appetite and executives' experimental behavior. This further underscores the role of Confucianism in shaping corporate dynamics. These findings offer valuable managerial insights for Chinese firms seeking to advance DT while also enriching the understanding of board age diversity from a cultural perspective.

Keywords: Digital transformation; Age variety; Age separation; Board diversity; Confucianism (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:100:y:2025:i:c:s1059056025002692

DOI: 10.1016/j.iref.2025.104106

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