Board Connectedness and Innovation Search Strategy

Senlin Miao, Mengyi Gu, Mengchao Ai, John Bai and Alptug Y. Yorulmaz ()
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Senlin Miao: NUAA - Nanjing University of Aeronautics and Astronautics [Nanjing]
Mengyi Gu: University of International Business and Economics [Beijing, China]
Mengchao Ai: Northeastern University [Boston]
John Bai: Northeastern University [Boston]
Alptug Y. Yorulmaz: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: We study whether and how board networks impact firms' innovation search strategy. Innovation search strategies can be explorative or exploitative, where the former are strategies that investigate unknown territories and are regarded as riskier, and the latter rely on existing know‐hows and are considered more conservative. Our results show that better connected boards engage in more exploitative innovation search strategies, and this effect is more pronounced for less competitive industries, firms with busy directors, and firms with young directors. Tests using exogenous director retirements and deaths confirm the baseline finding. Board connectedness is also positively associated with high innovation output, impact, efficiency, as well as firm value and performance. Further tests suggest that firms with well‐connected boards seem to adopt a conservative innovation approach within the firm but actively acquire targets with patents and impactful innovation output.

Date: 2025-11-23
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Published in Financial Management, 2025, ⟨10.1111/fima.70018⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05520292

DOI: 10.1111/fima.70018

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